India’s stock market value reached over $4 trillion on Tuesday, marking a significant milestone for the country’s equity market. The market capitalization of companies listed on India’s exchanges has risen by $1 trillion in less than three years, solidifying its position as one of the best performers in the region and the emerging world.
India’s key stock benchmarks have already seen a rise of over 13% this year and are expected to have their eighth-straight year of gains. In contrast, Hong Kong’s equity measure has fallen by 17%, with the total market value dropping to less than $4.7 trillion.
Political stability and strong domestic growth potential are factors that have contributed to India’s emergence as the fastest-growing major economy. The country has been making efforts to attract global investment in its capital markets and industrial production.
Foreign investors have shown confidence in India’s growth story, buying more than $15 billion of the nation’s stocks this year on a net basis. Additionally, domestic funds have poured in over $20 billion. This institutional support has been accompanied by a surge in retail trading amid the pandemic.
India’s shift from a consumption-oriented economy to one led by consumption and investment has been received positively by the markets. The nation’s economic growth has outperformed against a slowing global macro backdrop, with its GDP jumping 7.6% in the three months to September.
However, some experts caution about the risks that the upcoming elections pose to the stock market. They also highlight the high valuations of Indian shares as a reason for concern. The S&P BSE Sensex Index is presently trading at 20 times forward earnings estimates, slightly above its five-year average and higher than the global stocks gauge.
Despite the risks, some institutions remain optimistic about India’s growth prospects. Goldman Sachs upgraded India to overweight, citing it as having the best structural growth prospects in the region. Nomura Holdings maintained its overweight recommendation on India as well.
The structural growth prospects, political stability, and institutional investments, along with retail trading, have contributed to India’s stock market value exceeding $4 trillion. However, cautious investors are mindful of the risks and valuations, considering the upcoming elections and the volatility in the markets.
