Current bull rally of Indian market added another medal to its basket on Tuesday. With the combined market cap of ~$4.3 trillion, the India replaced Hong Kong ($4.29 trillion) to be counted as 4th most valued country in the world. This data was till 22nd Jan 2024. While Indian equity markets and Hong Kong markets were close since quite some time, Indian markets were able to final outperform.
Talking about the global charts, rankings by market cap is being led by the US with value of ~$51 trillion, followed by China’s value of $8.5 trillion and Japan’s value of $6.5 trillion.
Indian equity markets and Hong Kong markets: A comparison
Since the low of March 2020, Sensex – the frontline index for Indian stock market – went up by 2.5x. In comparison to this, Hang Seng – front line benchmark for Hong Kong stock market, has seen a fall of ~33%.
Such kind of huge outperformance supported by strong growth of Indian economy and numerous listings of large and small companies on BSE and NSE continued to support India’s market cap in comparison to that of Hong Kong’s.
Market experts believe that a range of possible triggers, which includes strong economic growth and solid corporate results, led to the bullish trend and supported optimism in the markets. Moreover, healthy inflows from both domestic and FIIs lent much-needed support.
Domestic institutional investors supported Indian equities as they net bought a record INR 2.53 lakh crore worth of shares for the year ended 31 March 2023 (FY23). This was even higher than INR 2.21 lakh crore which they pumped in market in FY22. Talking about the recent month, in March 2024, DIIs purchased INR 51,331.95 crore worth of equity. This was the highest in a month seen in entire FY24.
Overall, in FY24, DIIs pumped in to the tune of INR 202,117.56 crore worth of stocks. Apart from this, FIIs purchased a net of $25.43 billion worth of Indian equities in FY24 (for the year ended March 31, 2024.
On the other hand, Hong Kong’s stock market was impacted by the struggling economy, weak consumption, difficult and strained US-China ties along with property crisis. Collectively, these factors resulted in net foreign outflows. Lack of liquidity exhibits that institutional interest in Hong Kong and China continues to decline.
What all factors have contributed in this rally?
Since touching a multi-year low in the month of late-March 2020, Indian market saw a bull rally, which was supported by several global and domestic tailwinds and measures. Such measures include world’s definite move to a China-plus supply chain situation.
This means that global economic experts were looking for at least 1 alternative country which can supply manufacturing articles in which China was categorised as a near-monopoly player. As per the global and domestic analysts, India has been regarded as main beneficiaries of such global shift.
According to recent data, India’s overall exports (merchandise and services combined) in February 2024 are estimated to come at $73.55 billion, showcasing positive growth of 14.20% on year-over-year basis.
Secondly, prolonged economic slowdown in Chinese economy in the post-pandemic era somewhat supported the overall Indian equities as Indian economy exhibited resilience. This prompted international fund managers to shift more funds to Indian equities.
While Indian equity markets and Hong Kong markets were in the close competition, on the domestic front, a range of factors lent some support to Indian economy. Some of these factors include healthy and stable growth in tax collections, reined-in inflation, strong corporate earnings growth and stability in currency movements.
What factors can support Indian equities in current fiscal FY25?
With BJP winning by majority of votes in Madhya Pradesh, Rajasthan, and Chhattisgarh in state assembly elections on 13th December, Indians have become certain about the winning of ruling in national elections too 2024.
Hints about political stability post 2024 general elections, healthy growth momentum in Indian economy, cooling off of inflation, consistent fall in the US bond yields and decline in Brent crude should support India’s stock market.
Apart from these factors, FPI inflows might continue for the upcoming few months. FPIs are expected to buying shares of leading sectors such as IT, telecom, automobiles and capital goods. Recently, Barclays have stated that Reserve Bank of India might go for a rate cut in 3Q calendar 2024.
Indian economy saw an increase of 8.4% in quarter ended December 2023, crushing the analysts’ estimates. Moving forward, GDP growth is expected to be supported by strong manufacturing and construction activity.