Record stock market valuations and growing foreign capital inflows provide an ideal backdrop as Prime Minister Narendra Modi seeks to highlight India’s growing importance to world leaders at G20 summit this weekend in Delhi.
Fueled by one of the world’s fastest-growing economies, strong corporate profits and an unprecedented boom in retail investment, the country’s equity index is also approaching to record levels.
These steps stand in stark contrast to those of many emerging nations, especially neighboring China, where economic woes and troubled financial markets have become a source of frustration for investors. global investors. In fact, the difficulties facing the biggest emerging market rival have only weakened India’s appeal.
Developing markets fund managers now value India in their Asia portfolios as a “safe haven”, while Goldman Sachs Group Inc. consider China as one of the countries with the lowest proportion. ” the analysts wrote in a report earlier this month.
Audrey Goh, investment strategist at Standard Chartered Bank SG Ltd, said: “Strong domestic growth prospects, ongoing policy reforms as well as strong credit growth are favorable factors. contributing to promoting the Indian stock market to perform better.” “The shift to a multipolar world could also benefit India,” as the government works to make doing business in India more attractive. The Indian stock market hit a record valuation of $3.8 trillion this week, a perfect sign for Modi as the G20 summit gives him another chance to showcase his country’s potential. the country as a geopolitical power.
As the West seeks to limit China’s influence, Prime Minister Modi has implemented a combination of tariffs and incentives to encourage companies to manufacture in India, including Apple Inc. and Samsung Electronics Co. is among the enterprises expanding production in this country.
Foreign investors have bought a net of more than $16 billion in Indian stocks so far in 2023, which is expected to be the largest capital inflow in three years. The country stood out in August, when foreign funds sold shares in most other emerging markets in Asia, amid a global sell-off. Onshore Chinese stocks saw a record run last month as Beijing tried to do the same. Foreign investors have bought a net of more than $16 billion in Indian stocks so far in 2023, which is expected to be the largest capital inflow in three years. The country stood out in August, when foreign funds sold shares in most other emerging markets in Asia, amid a global sell-off. Efforts to restore market confidence have failed in the eyes of investors amid lingering concerns about the housing crisis.
“My favorite market in Asia is still India,” Chris Wood, head of global equity strategy at Jefferies LLC, said in an interview with Bloomberg Television this week. Wood described India as “the market I want to be in in Asia in the next 10 years”, forecasting strong corporate profit growth thanks to the rejuvenation of the private investment and real estate cycles.
According to data compiled by Bloomberg, India’s value has nearly tripled since the pandemic hit global stocks in March 2020, with India now the world’s fifth-largest stock market. gender. The US saw its market capitalization double during this period.
Milan-based Generali Investments is bullish on India due to its economic growth and earnings outlook, according to Michele Morganti, senior equity strategist at the firm. Generali eased its focus on China last month as policymakers opted for restrictive measures to support businesses and bolster confidence in a comprehensive recovery plan, he said.
There are certainly some risks looming over India. The resurgence in crude oil prices threatens to worsen inflationary dynamics for the central bank, which is already struggling due to soaring prices of everyday goods from tomatoes to onions. The Indian rupee is at record levels.
Investors face a general election in April-May that some strategists say could shake up markets. Over the longer term, market observers will also look closely at India’s ability to quickly and adequately build infrastructure, raise education standards and create enough jobs for its young, growing population. development, amid growing threats related to the growing use of artificial intelligence. An aperture investor is one of those holders who do not increase their exposure. Peter Marber, the firm’s New York-based head of emerging markets, said India needs several years of infrastructure improvements and private sector development before it can replace China in your investment portfolio. “Financial investors’ withdrawal from Chinese stocks and bonds has not led to a complete shift to India,” Marber said. “There are not as many investable companies and assets in India as there are in China.”
But now, the market is seeing positive things. The NSE Nifty 50 index has gained nearly 6% in dollar terms over the past three months, beating the MSCI Emerging Markets index by more than 7 percentage points. India is one of the largest equity holdings at Columbia Threadneedle Investments, which also expects countries such as Indonesia, Mexico and Poland to benefit from the quasi-overseas boom as the United States Ky is moving their supply chain out of China. The fund manager is also bullish on local currency-denominated Indian government bonds, dollar-denominated corporate debt as well as the rupee.
“On a relative basis, India could be the biggest winner,” said Gordon Bowers, an analyst at the London-based firm.
