Bucking the emerging market trend: India mcap nears another peak

Foreign investors have bought more than $16 billion worth of Indian stocks on a net basis so far in 2023, set to be the biggest inflow in 3 years

While New Delhi was in the global spotlight this past weekend as Prime Minister Narendra Modi successfully hosted world leaders at the G-20 summit, in Mumbai the stock market hit an all-time high valuation of $3.8 trillion.

Boosted by one of the world’s fastest growing economies, solid corporate earnings and an unprecedented retail investing boom, the Nifty50 hitting its all-time high 19.996 points after hitting 20,000 on Monday and the Sensex very close to it.

The milestones are a stark contrast to many emerging-market (EM) peers, not least to neighboring China, whose economic woes and struggling financial markets have been a source of frustration for global investors. In fact, troubles at its biggest EM rival have only burnished India’s appeal.

EM money managers are now most overweight on India in their Asia portfolios as a “safe place to hide,” while China ranks among their largest underweights, Goldman Sachs analysts wrote in a report earlier this month. Such investor optimism looks likely to stay strong despite near-term risks from inflation and a general election in 2024.

“Strong domestic growth prospects, ongoing policy reforms as well as robust credit growth are tailwinds contributing to the outperformance of Indian equities,” said Audrey Goh, investment strategist at Standard Chartered Bank.

“The shift to a multi-polar world would also likely benefit India,” with the government moving to make doing business in India more attractive, she said.

With the West looking to curb China’s influence, Modi has rolled out a mix of tariffs and incentives to lure companies to make in India and firms including Apple and Samsung Electronics are among those expanding production in the nation.

Foreign investors have bought more than $16 billion worth of Indian stocks on a net basis so far in 2023, set to be the biggest inflow in three years. The nation stood out in August, when overseas funds sold shares in almost every other Asian emerging market amid a global selloff.