India Now Has the Fourth-Largest Stock Market in the World, Passing Hong Kong

In yet another achievement for the South Asian country whose development potential and policy changes have made it an investment favorite, India’s stock market has surpassed Hong Kong’s for the first time.

Bloomberg data shows that as of Monday’s closing, the total value of shares listed on Indian exchanges was $4.33 trillion, compared to $4.29 trillion for Hong Kong. India is now the world’s fourth-largest equities market as a result. On December 5, its stock market value exceeded $4 trillion for the first time, with over half of that amount coming from the previous four years.

India’s equity market has been thriving because of robust corporate profitability and a steadily expanding pool of regular investors. Thanks to its stable political system and a consumption-driven economy that continues to develop at one of the quickest rates among major countries, the most populous country in the world has positioned itself as a viable alternative to China, drawing new investment from both international investors and enterprises.

Chief investment officer Ashish Gupta of Axis Mutual Fund in Mumbai said, “India has all the right ingredients in place to set the growth momentum further,”

The unrelenting surge in Indian equities has occurred at the same time as a record sell-off in Hong Kong, the listing home of some of China’s most prominent and creative companies. China’s attractiveness as the world’s development engine has been undermined by Beijing’s strict anti-Covid-19 regulations, regulatory crackdowns on firms, a property-sector crisis, and geopolitical tensions with the West.

Additionally, they set off an epic-scale stock market meltdown, with the value of all Chinese and Hong Kong stocks plunging below their 2021 high by more than $6 trillion. After years of being one of the busiest sites for initial public offerings worldwide, Hong Kong has seen a decline in new listings.

Still, some strategists anticipate a change in fortune. According to a November analysis by UBS Group AG, the latter is at “fairly extreme levels,” while Chinese equities are expected to beat their Indian counterparts in 2024 due to strong upside potential in the former given their battered values if sentiment comes around. According to a report earlier this month, Bernstein forecasts a recovery in the Chinese market and advises selling Indian equities that it considers to be overpriced.

Nevertheless, for the time being, it seems like India has momentum.

The absence of significant economic stimulus measures in the new year has contributed to a further deepening of pessimism regarding China and Hong Kong. After ending a record-breaking four-year losing trend in 2023, the Hang Seng China Enterprises Index, a measure of Chinese equities traded in Hong Kong, is now down almost thirteen percent. The measure is rapidly approaching its lowest point in over 20 years, yet the benchmarks for Indian stocks are trading close to all-time highs.

Investors who were previously captivated by China’s story are now shifting their money to its adversary in South Asia. According to a recent survey by the London-based think group Official Monetary and Financial Institutions Forum, global pension and sovereign wealth managers are also seen as preferring India.

In 2023, foreign investors invested over $21 billion in Indian stocks, contributing to the nation’s benchmark S&P BSE Sensex Index reaching a record eight years of increases.

Goldman Sachs Group Inc. strategists Guillaume Jaisson and Peter Oppenheimer said in a letter on January 16 with the findings of a poll from the firm’s Global Strategy Conference, “There is a clear consensus that India is the best long-term investment opportunity.”