India is now the world's fourth-largest stock market after overtaking Hong Kong's stock market in December, with its valuation now exceeding $4 trillion.
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Analysts say India's market capitalization could easily reach $40 trillion over the next 20 years, driven by strong investor confidence and strong economic growth.
Sujan Hajira, chief economist at Anand Rati Share and Stock Brokers, cited the country's strong economic growth and “much more stable” currency, saying, “It could easily reach $40 trillion by then.” Deaf,” he said.
Manish Chohani, director of investment services firm Enam Holdings, was even more bullish, predicting that India's market could soar to $60 trillion over the next 20 years.
India's benchmark Nifty 50 index soared 20% in 2023. The country's market, which overtook Hong Kong in December, is now ranked fourth in the world, with a value of more than $4.6 trillion. The Nifty 50 index and BSE Sensex index rose to new closing highs of $22,666 and $74,742, respectively, on Monday, according to Refinitiv data.
Atul Singh, CEO and Managing Director of LGT Wealth India, an asset management firm, said, “India's GDP growth has led to higher corporate profits, which has led to better stock market performance.'' said.
India's Ministry of Statistics announced that the Indian economy is estimated to grow by 7.2% in FY2023 and by 7.6% in FY2024. The country's fiscal year begins on April 1st and ends on March 31st.
In contrast, Shin noted that China's economic growth has not translated into higher stock prices in recent years. China's economic growth rate last year was 5.2%, matching the official target of around 5%. However, the benchmark CSI 300 has fallen for the third year in a row, dropping 11.4% last year.
“In other words, stock market growth in India is being driven by real profit growth…The process of converting nominal GDP growth into profit growth and stock market gains will remain in place for the next 20 years,” Singh said in an interview with CNBC. It will stay,” he said.
Hajra said India also has a “new pipeline of capital” that could continue to boost market valuations. India had 220 initial public offerings (IPOs) in 2023, the most of any country, according to EY.
“India has over 6,000 of the world's largest listed companies, which prefer to raise equity early in their lifecycle,” Hajra explained.
Prices are rising in the Indian market following recent increases. The price-to-earnings ratio of the benchmark BSE Sensex is 25.44 times, while the average P/E ratio of Shanghai Stock Exchange and Shenzhen Stock Exchange is 12.25 times and 21.12 times, respectively.
Despite these high valuation multiples, analysts said India should still be part of investors' core allocation.
Sunil Kul, Asia Pacific portfolio strategist at Goldman Sachs, predicted a shift away from small- and mid-cap stocks and advised investors to focus more on large-cap stocks.
“One of our key takeaways going into this year is that we should see some rotation in the market. This has been the year of mid-cap and small-cap stocks, but that has already been seen in the past month. That seems to be changing,” Kuhl said. Last week's CNBC's “Street Signs Asia.”
But LGT Wealth India's Singh said, “Opportunities are everywhere.”
He recommended focusing on the financial services sector, saying, “There are some great companies that are experiencing strong growth over the long term.”
