India’s Meteoric Climb Continues As Stock Market Surpasses Hong Kong To Become Fourth-Largest Worldwide
The Chinese Century risks becoming the Indian Century if the PRC doesn’t play its cards right. While China is considering a $278B package to revive its ailing stock market, its next-door neighbor leaped past Hong Kong to become the fourth-largest stock market in the world. At a value of $4.33T, India’s National Stock Exchange (NSE) now stands in fourth place globally, trailing only behind Japan, China, and the US.
India’s ascent: Last year, India not only overtook China as the world’s most populous country, but also shed itsreputation of market scams and telescams to emerge as a key driver of global growth. The country’s rapidly growing population, expanding GDP, and increased government spending have translated into a thriving stock market, witnessing eight consecutive years of positive returns — with more than half of its gains occuring in just the last four years.
- The quality of corporate earnings in the nation has been rising, particularly in their banking, healthcare, and energy sectors. HSBC forecasts a 17.8% growth in earnings this year, one of the fastest rates in Asia.
- Retail investors have played a pivotal role, setting records and outpacing overseas investment, helping companies in India’s Nifty 500 Index increase over 25% last year, surpassing the S&P 500.
And analysts believe there’s plenty more growth to come, even as India approaches a significant election year. Goldman Sachs strategists called India “the best long-term investment opportunity,” while Global X ETFs CEO Evan Metcalf hails it as “the best structural growth story.”
What’s lies ahead for India in 2024?
Despite India’s market momentum, foreign direct investment has dwindled since 2022. Overseas investors are opting for rapidly growing early-stage startups over expensive Indian stocks — which has become a bigger risk for investors:
- According to India’s HDFC Securities, the Nifty 50 index trades at a 23x FY24 price-to-earnings ratio — making it more expensive than the S&P 500’s 21x.
- Regardless of strong returns, market newcomers have struggled, with 77% of Indian IPOs underperforming the NSE500 Index by an average of 14% each year.
Global access: There are no major state-side ETFs that track the Nifty 500, but the low-cost Franklin FTSE India ETF (NYSE:FLIN) or iShares MSCI India ETF (BATS:INDA) offer exposure to a wide variety of large and mid-cap Indian companies — which could be preferable for India-curious investors.