The Indian stock market has stood out in the global economic slowdown, repeatedly reaching new historical highs. With the surge in personal investor investments and the recovery of foreign capital inflows, the valuation of the Indian stock market is approaching $4 trillion for the first time, second only to the United States, China, and Japan.
Recently, influenced by strong domestic macroeconomic data in India and expectations of global interest rate easing, the Indian stock market has performed outstandingly.
According to data compiled by media sources, since the low point of the epidemic in March 2020, the total market value of Indian stocks has grown by about double. As of Monday (December 4th), it was just a step away from reaching $4 trillion.
After winning three key state elections led by Prime Minister Narendra Modi’s ruling party Bharatiya Janata Party over last weekend, India’s benchmark NSE Nifty 50 index rose 2.1% on Monday to reach a new record closing high. The upward trend continued on Tuesday with an increase of 0.54%, closing at 20,789.90 points.
In March 2020 during the epidemic period, NSE Nifty 50 index had once fallen to a level as low as 7,511.10.
In addition，India’s Sensex index closed up by 2.05% at 68，865.12 points，also hitting a historic high.
For investors，the victory of Bharatiya Janata Party in local elections eliminates one political risk factor for them and consolidates Modi’s position before next year’s national election; more people are betting that government policies will remain consistent.
Multiple positive factors
The Indian stock market has been steadily boosted by retail investment frenzy during the epidemic period this year; overseas funds have also invested $15 billion into India’s stock market so far this year.
At same time，India’s young population structure and Prime Minister Modi’s efforts to gain a larger share in the global supply chain are helping attract international companies such as Apple to India; a new study by London think tank Official Monetary and Financial Institutions Forum also shows that global pension funds and sovereign wealth management companies are flocking to India.
Thanks to various positive factors, the Nifty 50 index has risen nearly 14% so far this year, marking an unprecedented eighth consecutive year of growth; Morgan Stanley Capital International (MSCI)’s Indian stock market index is expected to outperform the global emerging markets index for the third consecutive year by more than 10 percentage points.
The prosperity of the Indian stock market has also sparked a frenzy in IPOs, with some new stocks experiencing remarkable gains in recent days.
Tanvi Kanchan, director of Anand Rathi Shares and Stock Brokers in India, said: “This year we have seen excellent performance from mid-cap stocks which have contributed to the overall economic capital expenditure recovery.”
Rajiv Batra, strategist at JPMorgan Chase & Co., and his team wrote in a recent report: “We believe that recent factors driving the market higher include strong economic activity data, impressive corporate earnings data, falling oil prices，and strong domestic fund flows.”
However，the risk for the Indian stock market may come from its high valuation. Some investors express concerns about overvaluation and overcrowding in trading on the Indian stock market，which increases the possibility of a market correction.