India has outpaced Hong Kong, marking a significant milestone for the South Asian nation. Propelled by robust growth prospects and policy reforms, India’s stock market now boasts a combined value of $4.33 trillion as of Monday’s closing, surpassing Hong Kong’s $4.29 trillion, according to Bloomberg data.
This achievement positions India as the fourth-largest equity market worldwide. The country’s stock market capitalization exceeded $4 trillion for the first time on December 5, with substantial growth occurring over the past four years. India’s equities have experienced a booming trend, driven by a rapidly expanding retail investor base and robust corporate earnings.
With a stable political environment and a consumption-driven economy among the fastest-growing globally, India emerges as an attractive alternative to China. Its appeal has attracted fresh capital from global investors and companies alike.
Ashish Gupta, Chief Investment Officer at Axis Mutual Fund in Mumbai, remarked, “India has all the right ingredients in place to set the growth momentum further.”
This positive momentum in Indian stocks coincides with a historic downturn in Hong Kong. Factors such as Beijing’s stringent anti-Covid-19 measures, regulatory crackdowns on corporations, a property-sector crisis, and geopolitical tensions with the West have collectively diminished China’s appeal as the world’s growth engine.
The relentless rally in Indian stocks underscores the country’s resilience and attractiveness as a key player in the global equity landscape.
The equities downturn in China and Hong Kong has taken a toll on the total market value, witnessing a staggering decline of over $6 trillion since the peaks in 2021. Hong Kong, once a bustling hub for initial public offerings, has experienced a dearth of new listings, losing its status as a premier venue for IPOs globally.
Despite the challenging conditions, some strategists anticipate a potential turnaround. UBS Group AG foresees Chinese stocks outperforming their Indian counterparts in 2024, citing significant upside potential in the former due to battered valuations. In contrast, Indian stocks are viewed as being at “fairly extreme levels.” Bernstein expects the Chinese market to recover, advising profit-taking on Indian stocks, perceived as expensive.
However, the momentum currently appears to favor India. Pessimism towards China and Hong Kong has deepened in the new year, exacerbated by a lack of major economic stimulus measures. The Hang Seng China Enterprises Index, reflecting Chinese shares in Hong Kong, has already experienced a 13% decline after concluding a record four-year losing streak in 2023. Meanwhile, India’s stock benchmarks remain close to record-high levels.
Foreign investors, once enamored with the China narrative, are redirecting their funds to India. Global pension and sovereign wealth managers are reportedly favoring India, as indicated by a study from the London-based think-tank Official Monetary and Financial Institutions Forum. In 2023, overseas funds flowed into Indian shares, exceeding $21 billion and contributing to the eighth consecutive year of gains for the country’s benchmark S&P BSE Sensex Index.
Goldman Sachs strategists underscore the prevailing consensus that India presents the best long-term investment opportunity. This sentiment is derived from the results of a survey conducted during the firm’s Global Strategy Conference. It’s essential to note that market capitalization is calculated from all outstanding shares, excluding ETFs and ADRs, to avoid double counting and ensure accurate representation of actively traded, primary securities on the country’s exchanges.