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By Ashutosh Joshi
India’s stock market has surpassed that of Hong Kong for the first time in another feat for the South Asian nation whose growth prospects and political reforms have made it a favorite of investors.
The combined value of stocks listed on Indian exchanges reached $4.33 trillion as of Monday’s close, compared with $4.29 trillion in Hong Kong, according to data compiled by Bloomberg. That makes India the fourth largest stock market in the world. Its market capitalization surpassed $4 trillion for the first time on Dec. 5, with about half of that figure coming in the past four years.
Stocks in India have been booming, thanks to a rapidly growing retail investor base and strong corporate profits. The world’s most populous country has positioned itself as an alternative to China, attracting fresh capital from both global investors and companies, thanks to its stable political setup and a consumer-driven economy that remains among the fastest-growing major nations. .
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“India has all the right ingredients to further drive growth momentum,” said Ashish Gupta, chief investment officer at Axis Mutual Fund in Mumbai.
The relentless rally in Indian stocks has coincided with a historic decline in Hong Kong, where some of China’s most influential and innovative companies are listed. Beijing’s strict anti-Covid-19 restrictions, regulatory crackdowns on corporations, a real estate crisis and geopolitical tensions with the West have combined to erode China’s appeal as a global growth engine.
They have also triggered a stock crash that is now reaching epic proportions: the total market value of Chinese and Hong Kong stocks has plummeted by more than $6 trillion from their highs in 2021. The new listings are have sold out in Hong Kong, with the central Asian financial sector losing its status as one of the world’s busiest places for initial public offerings.
However, some strategists expect a change. UBS Group AG believes Chinese stocks will outperform their Indian peers in 2024, as the former’s battered valuations suggest significant upside potential once sentiment changes, while the latter are at “pretty extreme levels,” according to a report from November. Bernstein expects the Chinese market to recover and recommends taking profits from Indian stocks, which he considers expensive, according to a note from earlier this month.
That said, the momentum seems to be on India’s side for now.
Pessimism towards China and Hong Kong has deepened further in the new year amid a lack of major economic stimulus measures. The Hang Seng China Enterprises Index, a gauge of Chinese stocks listed in Hong Kong, is already down about 13 percent after capping a record four-year losing streak in 2023. The measure is hurtling toward its lowest level. low in almost two decades, while India’s stock benchmarks are trading near record levels.
Foreigners who until recently were enamored of China’s narrative are sending their funds to its South Asian rival. Global pension and sovereign wealth managers are also seen as favoring India, according to a recent study by the Official Monetary and Financial Institutions Forum, a London-based think tank.
Foreign funds invested more than $21 billion in Indian stocks in 2023, helping the country’s benchmark S&P BSE Sensex cap an eighth straight year of gains.
“There is a clear consensus that India is the best long-term investment opportunity,” wrote Goldman Sachs Group Inc. strategists, including Guillaume Jaisson and Peter Oppenheimer, in a Jan. 16 note with the results of a survey by the Company Global Strategy Conference.
*NOTE: Market capitalization is calculated from all shares outstanding. The data does not include ETFs or ADRs as they do not directly represent companies. It includes only primary securities actively traded on the country’s stock exchanges to also avoid double counting. Therefore, the values will be significantly lower than the market capitalization values of a country’s stock exchanges from other sources.
First published: January 23, 2024 | 8:04 a.m. IS
