Mumbai - India's business activity is experiencing a rapid expansion, reaching its fastest pace in four months in January, driven by increased demand, according to a recent private survey. This positive trend suggests that India, Asia's third-largest economy, is poised to maintain its status as the fastest-growing major economy. A Reuters poll indicates a projected growth rate of 6.9% for the current fiscal year.
In a notable milestone, India's stock market has overtaken Hong Kong's for the first time, with a combined value of listed shares reaching $4.33 trillion, surpassing Hong Kong's $4.29 trillion, as reported by Bloomberg. This positions India as the fourth-largest equity market globally, with its market capitalization crossing $4 trillion for the first time in December.
The Indian equities surge is attributed to a burgeoning retail investor base and robust corporate earnings. India has emerged as an attractive alternative to China, drawing fresh capital from global investors and companies due to its stable political environment and a consumption-driven economy among the world's fastest-growing.
"India has all the right ingredients in place to set the growth momentum further," notes Ashish Gupta, Chief Investment Officer at Axis Mutual Fund in Mumbai.
Simultaneously, Hong Kong has faced challenges, experiencing a historic slump attributed to Beijing's stringent anti-COVID-19 measures, regulatory crackdowns, a property-sector crisis, and geopolitical tensions. The total market value of Chinese and Hong Kong stocks has plummeted by over $6 trillion since their peaks in 2021.
UBS Group AG anticipates a potential turnaround in Chinese stocks in 2024, suggesting that battered valuations may present significant upside potential. However, some analysts, such as Bernstein, recommend taking profits on Indian stocks, citing elevated valuations.
Despite differing opinions, momentum appears to favor India for now. Pessimism towards China and Hong Kong has deepened, with the Hang Seng China Enterprises Index already down approximately 13% in the new year. Meanwhile, India's stock benchmarks are trading near record-high levels.
Foreign investors are redirecting funds to India, with global pension and sovereign wealth managers favoring the South Asian nation, according to a study by the Official Monetary and Financial Institutions Forum. In 2023, over $21 billion flowed into Indian shares, contributing to the eighth consecutive year of gains for the S&P BSE Sensex Index.
Goldman Sachs Group Inc. strategists, including Guillaume Jaisson and Peter Oppenheimer, underscore the consensus that India represents the best long-term investment opportunity. A survey from the firm's Global Strategy Conference affirms the positive sentiment towards India in the investment landscape.