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The Indian stock market is poised to take Hong Kong’s place among the world’s largest stock exchanges, in a rise that analysts say attests to investors’ optimism about the economic prospects of the world’s most populous country.
The total market capitalization of domestic listed companies in India was $3.7 trillion as of the end of October, according to the World Federation of Exchanges, a trade association for publicly regulated stock markets, compared with $3.9 trillion in Hong Kong.
Indian stock prices rose in November on strong earnings and upbeat growth prospects, putting the Indian Stock Exchange Group on track to become the world’s seventh-largest stock exchange after the NYSE, Nasdaq, Shanghai, Euronext, Japan and Shenzhen.
India’s Nifty 50 index of large companies rose 8.1 percent over the past month, reaching record levels this week, while Hong Kong’s Hang Seng Index fell 6.7 percent over the same period as the Chinese economy slowed.
Over the past decade, Indian and Chinese equity indices have largely moved in tandem as part of the overall emerging markets story, said Abhiram Eleswarapu, head of Indian equities at BNP Paribas in Hong Kong.
They started to diverge in the last three years, Ileswarapu said. “Chinese stock indices have been on a downward trend overall… while the Indian road has been going in one direction, which is up.”
Strong consumption in India is attracting investors, Eleswarapu said, pointing to increased spending on real estate, luxury goods and high-end goods by wealthy Indians, as well as growing government capital spending on infrastructure.
India is the world’s fastest-growing large economy this year, and is expected to grow 6.3 percent this year, compared to 5 percent for China, according to the International Monetary Fund.
“When you look around the world, there are not a large number of countries where you can be reasonably confident over the next 15 to 20 years that they will see real GDP growth of at least 6 percent on an annual basis,” Prateek Gupta said. “Sustainable.” , CEO and Co-Head of Institutional Equities at Kotak Securities in Mumbai.
Narendra Modi’s Bharatiya Janata Party won three out of five recent local body elections in contested states, fueling speculation that the ruling party will easily win next year’s national elections and maintain political stability.
Gupta said that Indian companies continue to reduce their debt, a process that has been ongoing for several years. They have been paying down their debt and issuing stock in a trend that has accelerated during the pandemic. Tata Technologies, a subsidiary of the Tata Group, made a strong market debut in November, raising 30.4 billion rupees ($365 million) in an initial public offering that was subscribed 69 times.
India is also benefiting from the “China plus one” shift in supply chains away from China. The Financial Times reported this week that Apple, which has the bulk of its current manufacturing base in China, has asked component suppliers to source batteries for the upcoming iPhone 16 from Indian factories.
Meanwhile, Tesla has held talks with officials in the Modi government about the possibility of setting up an Indian factory to produce electric cars.
The rise in stock prices in India was driven more by domestic fund inflows than by foreign fund inflows during most of this year. Foreigners are now net buyers of Indian stocks, after being net sellers in September and October.
“China continues to be an underperformer, and there are relatively few alternatives for investors focused on emerging stocks,” said Deepak Jasani, head of retail research at HDFC Securities in Mumbai.
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