Record stock market valuations as Prime Minister Narendra Modi looks to tout India’s rising prominence to world leaders at the Group of 20 (G20) summit in New Delhi this weekend. The rapid increase in the influx of foreigners provides a wonderful backdrop.
India’s equity benchmarks are also nearing record highs, driven by the world’s fastest-growing economy, strong corporate profits and an unprecedented boom in retail investment.
The milestone stands in sharp contrast to many emerging market countries, including neighboring China, where economic woes and weak financial markets are a source of frustration for global investors. Indeed, the problems of the emerging market’s biggest rivals only make India more attractive. Goldman Sachs Group analysts currently have India as the most overweight “safe haven” in their Asia portfolio, while China ranks as one of the biggest underweights. Goldman Sachs Group Inc. analysts said in a note earlier this month.
Audrey Goh, investment strategist at Standard Chartered Bank SG, said: “Strong domestic growth prospects, ongoing policy reforms and strong credit growth are contributing to the outperformance of Indian equities. “The transition to a multipolar world will also have an impact.” The government is working to make doing business in India more attractive.
India’s stock market hit a record valuation of $3.8 trillion this week, but for Modi the G20 summit is another opportunity to showcase the country’s potential as a geopolitical giant. It was a sign of perfect timing. As Western countries seek to curb China’s influence, Prime Minister Modi has launched a combination of tariffs and incentives to entice companies to produce in India, with companies such as Apple and Samsung Electronics We are expanding production in
Foreign investors are expected to buy a net worth of more than $16 billion in Indian stocks by 2023, the biggest inflow in three years. The country stood out in August, when foreign funds sold nearly all Asian emerging market stocks amid a global stock market selloff. Domestic Chinese stocks saw record outflows last month as Beijing’s attempts to restore market confidence failed to meet investors’ expectations amid persistent concerns over the real estate crisis.
“My favorite market in Asia is still India,” Chris Wood, global head of equity strategy at Jefferies LLC, said in an interview on Bloomberg TV this week. Wood described India as “the market I want to be in Asia for the next 10 years,” and predicted strong growth in corporate profits due to private investment and a revitalized real estate cycle.
Its value has nearly tripled since the pandemic-induced global stock market low in March 2020, and India is now the world’s fifth-largest stock market, according to data compiled by Bloomberg. The US market capitalization approximately doubled during this period.
Milan-based Generali Investments is bullish on India’s economic growth and earnings outlook, said Michele Morganti, senior equity strategist at the firm. He said Generali reduced its excessive weighting to China last month as policymakers opted for limited measures to support businesses and stir sentiment rather than full-scale economic stimulus.
To be sure, some risks loom for India.
A rebound in oil prices threatens to worsen inflation trends for the central bank, which is already struggling with soaring prices for everyday items from tomatoes to onions. On the other hand, the rupee is hovering near its all-time low.
Investors need to weather the April-May general election, which some strategists say could shake up the market. In the longer term, market watchers will also see whether India can quickly build the right infrastructure, raise education standards and create enough jobs for its burgeoning youth population amid the growing threat from the increasing use of artificial intelligence. will be scrutinized closely.
Aperture Investors ranks among the holdout stocks that haven’t increased exposure. Peter Marber, head of emerging markets at the New York-based firm, said India would need years of infrastructure improvements and private sector reinforcement to replace China in its portfolio.
“Just because financial investors are exiting Chinese stocks and bonds doesn’t mean there will be a complete shift to India,” Marber said. “India does not have as many investable companies and assets as China.”
But for now, the market is looking positive. The NSE Nifty 50 index has gained about 6% in dollar terms over the past three months, outperforming the broader MSCI Emerging Markets Index by more than 7 percentage points.
Columbia Threadneedle Investments has one of its biggest equity overweights in India and expects countries such as Indonesia, Mexico and Poland to also benefit from the nearshoring boom as the US moves supply chains out of China. are doing. In addition to the rupee, the manager is bullish on India’s local currency government bonds and dollar-denominated corporate bonds.
“Relatively speaking, India could be the biggest winner,” said Gordon Bowers, an analyst at the London-based firm.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)