New Delhi: Global brokerage major Credit Suisse is 'underweight' on Indian equities and said that the country is one of the four most overvalued markets along with Indonesia, the Philippines and Malaysia.


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Underweight refers to a below-average chance of matching the performance of its peers, and hence investors should have less exposure to the stock in their portfolios.


Based on Credit Suisse's price-to-book ratio (P/BV) vs Return on equity (ROE) valuation model, India, Indonesia, the Philippines and Malaysia are the four most 'overvalued' in the world.


P/BV is a parameter to value stock, and the ratio is used to compare a stock's market value to its book value, while ROE measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.


"We are Underweight on the Expensive 4 club, which are the 4 most overvalued markets on our P/BV vs ROE valuation model?namely India, Indonesia, the Philippines and Malaysia," Credit Suisse said in a research note.


However, several investors have suggested that India is second and Indonesia the third most 'undervalued' market in the world based on 2017 expected PEG ratio.


The PEG ratio helps get a better understanding of whether or not a company's stock is overpriced. PEG ratio is calculated by stock's P/E ratio divided by the growth rate of its earnings for a specified time period.


Credit Suisse, however, believes that PEG ratios are usually based on "overly optimistic" EPS growth forecasts for the year ahead.


"We are not fans of PEG ratios (they remind us of Tech in 2000)," Credit Suisse said adding that PEG ratios are usually based on overly optimistic EPS growth forecasts for the year ahead.


According to the report, the average EPS revision for India is (-) 10 percentage points.


"If the last four-year average EPS revision for India is applied to 2017, then EPS growth is likely to be 8.4 percent. and the PEG ratio would double from 0.89x to 1.94x," Credit Suisse said.


The 30-share benchmark index Sensex is currently hovering around 27,700 points, while the wide-based Nifty is currently trading at 8,600 points.