The total value of stocks listed on Indian stock exchanges stood at $4.33 trillion as of Monday’s close, compared to $4.29 trillion for Hong Kong, according to data compiled by Bloomberg. This makes India the fourth largest stock market in the world. Its market capitalization exceeded $4 trillion for the first time on December 5, with almost half of that coming in the past four years.
Equities in India have been booming, thanks to the rapid growth of the retail investor base and strong corporate earnings. The world’s most populous country has positioned itself as an alternative to China, attracting new capital from global investors and companies alike, thanks to its stable political situation and its consumption-based economy that remains among the fastest growing major countries.
“India has all the right ingredients needed to boost growth momentum,” said Ashish Gupta, chief investment officer at Axis Mutual Fund in Mumbai.
The continued rise in Indian stocks has coincided with a historic slump in Hong Kong, where some of China’s most influential and innovative companies are listed. Beijing’s tough coronavirus restrictions, regulatory crackdowns on businesses, the real estate crisis, and geopolitical tensions with the West are all combining to undermine China’s appeal as an engine of global growth.
It has also sparked a decline in stocks that has now reached epic proportions, with the combined market value of Chinese and Hong Kong stocks down more than $6 trillion since their peak in 2021. New listings in Hong Kong have dried up, with Asian financial institutions remaining on the ropes. The center is losing its status as one of the busiest places in the world for initial public offerings.
However, some strategists expect a shift. UBS Group AG expects Chinese stocks to outperform their Indian counterparts in 2024, with weak valuations in the former indicating significant upside potential once sentiment turns, while the latter is at “fairly extreme levels,” according to a November report. Bernstein expects the Chinese market to recover, and recommends taking profits from Indian stocks, which it considers expensive, according to a note issued earlier this month.
However, the momentum seems to be on India’s side at the moment.
Pessimism towards China and Hong Kong has deepened further in the new year amid the lack of significant economic stimulus measures. The Hang Seng China Enterprise Index, a measure of Chinese stocks listed in Hong Kong, has already fallen about 13% after capping a record four-year losing streak in 2023. The index is hurtling toward its lowest level in nearly two decades, while… India Stock indices are trading near record highs.
Foreigners, who until recently were fascinated by China’s narrative, are sending their money to its South Asian rival. Global pension and sovereign wealth managers are also seen to favor India, according to a recent study by the official Monetary and Financial Institutions Forum of a London-based think tank.
Offshore funds pumped more than $21 billion into Indian stocks in 2023, helping the country’s benchmark Standard & Poor’s index. BSE Sensex The index achieves gains for the eighth year in a row.
“There is a clear consensus that India is the best long-term investment opportunity,” Goldman Sachs Group strategists, including Guillaume Jason and Peter Oppenheimer, wrote in a January 16 note including the results of a survey conducted by the firm’s Global Strategy Conference.
* NB: The market value of all outstanding shares is calculated. The data does not include ETFs and ETFs because they do not directly represent companies. It only includes primary securities actively traded on state exchanges to avoid double counting as well. Therefore, the values will be much lower than the market capitalization values of the country’s stock exchanges from other sources.