India’s Stock Market Surpasses Hong Kong’s, Becomes 4th Largest in the World

India has strategically positioned itself as an alternative to China, attracting substantial capital from global investors and companies.

This remarkable surge in Indian stocks aligns with a challenging period for Hong Kong, which has witnessed a historic slump.

In a historic milestone, India’s stock market has eclipsed Hong Kong’s, underlining the South Asian nation’s ascent as an investor favourite. The combined value of shares listed on Indian exchanges reached $4.33 trillion as of the latest data, surpassing Hong Kong’s $4.29 trillion. This makes India the fourth-largest equity market globally, a testament to its robust growth prospects and policy reforms.

India’s stock market capitalization crossed the $4 trillion mark on December 5, with around half of this achievement realized in the past four years. The nation’s equities have experienced a significant boom, attributed to a rapidly growing retail investor base and robust corporate earnings. India has strategically positioned itself as an alternative to China, attracting substantial capital from global investors and companies. The stable political environment and a consumption-driven economy, among the fastest-growing in major nations, have contributed to India’s appeal.

Ashish Gupta, Chief Investment Officer at Axis Mutual Fund in Mumbai, remarked, “India has all the right ingredients in place to set the growth momentum further.”

This remarkable surge in Indian stocks aligns with a challenging period for Hong Kong, which has witnessed a historic slump. Several factors, including stringent anti-COVID-19 measures, regulatory crackdowns on corporations, a property-sector crisis, and geopolitical tensions with the West, have diminished China’s appeal as the world’s growth engine. The total market value of Chinese and Hong Kong stocks has plummeted by over $6 trillion since their peaks in 2021.

China’s equity market troubles have spilt over into Hong Kong, eroding its status as one of the world’s busiest venues for initial public offerings. New listings have dried up, and the region faces a protracted equities rout.

Despite these challenges, some strategists anticipate a turnaround for Chinese stocks. UBS Group AG foresees Chinese stocks outperforming their Indian counterparts in 2024, suggesting significant upside potential due to battered valuations. On the other hand, a November report from UBS deemed Indian stocks to be at “fairly extreme levels.” Bernstein expects the Chinese market to recover and recommends profit-taking on Indian stocks.

Nevertheless, momentum appears to favour India at present. Pessimism toward China and Hong Kong has deepened in the new year, and the Hang Seng China Enterprises Index, a gauge of Chinese shares listed in Hong Kong, is already down about 13%. This comes after it capped a record four-year losing streak in 2023, hurtling toward its lowest level in almost two decades. In contrast, India’s stock benchmarks are trading near record-high levels.

Foreign investors, who were once captivated by the China narrative, are redirecting their funds towards India. According to a recent study by the Official Monetary and Financial Institutions Forum, a London-based think-tank, global pension and sovereign wealth managers are also favouring India.

In 2023 alone, overseas funds poured more than $21 billion into Indian shares, contributing to the country’s benchmark S&P BSE Sensex Index achieving an eighth consecutive year of gains.

Goldman Sachs Group Inc. strategies, including Guillaume Jaisson and Peter Oppenheimer, highlighted in a note from January 16 that there is a clear consensus that “India is the best long-term investment opportunity,” as indicated by the results of a survey from the firm’s Global Strategy Conference. This reinforces India’s status as an emerging global investor darling, driven by its economic resilience and attractiveness amid the evolving dynamics of the global financial landscape.

As India continues to strengthen its position, global investors keenly watch its trajectory, recognizing the nation’s potential as a key player in the international financial arena.