``Valuations for Indian markets look very attractive based on the price-earning (P/E) ratio. The stocks prices are quoting much below their actual values,'' Prudential ICICI asset management company chief investment officer Dileep Madgavkar said.

The P/E ratio of BSE Sensex and BSE national index are 19.37 and 20.77 respectively at present and in comparison, the P/E ratio in other emerging markets in the region ranges around 25. The P/E ratio indicates the premium paid over the company's earning per share (EPS) and higher the ratio, investors expects better earning prospects in future.

``Indian market scenario looks more attractive compared to emerging markets like Thailand, Malaysia, South Korea, Indonesia and the Phillipines,'' Madgavkar said.

Indian stocks should get thevaluation similar to the emerging markets in the wake of revival of the economy and increased restructuring undertaken by the corporates, he added. Regarding the future prospects of various sectors, Madgavkar said cement and auto-anciallary are expected to do well in the current fiscal.

``Stocks of these two sectors have already outperformed the overall market in the first four months of current fiscal with returns ranging between 100-200 per cent,'' he said.

The auto-ancillary sector would have twin benefit-revival of the domestic automobile sector and increased growth in the export market.

``Auto ancillary companies have become more efficient in the last couple of years both in terms of capacities and cost management leading to increased competition in the international markets,'' he added.

However, Madgavkar was skeptical about the software sector which was very much in the limelight in 1998 and cautioned that investors should be very selective while making investments in the software stocks.

Thesoftware sector is likely to see consolidations through mergers and acquisitions as `Indian software companies are still not big in size compared to foreign companies,' he said.

Here, each company has something specific to offer; one company may be strong in technology but weak in marketing its products. In order to overcome such weaknesses, consolidation is bound to occur, he said though it is difficult to give a time frame for the process.