Why has Nomura downgraded Indian stock markets?

A little over a week after global investment bank, UBS, downgraded India; Nomura has followed suit and downgraded Indian equities from overweight to neutral. One of the concerns expressed by a number of global investors in the last few days has been the valuations and the premium over the MSCI benchmark. This problem has only got compounded by the uncertainty due to global inflation, rates and Evergrande crisis.

Nomura has identified unfavourable risk-reward ratio as the principal reason for the downgrade. Nomura is currently recommending investors to reallocate funds from India to China and other ASEAN countries, where prices are depressed. According to Nomura, 77% of Indian stocks in the MSCI index were at valuations above median 2018 valuations, prior to the pandemic. UBS had downgraded India, Taiwan and Australia while upgrading China.