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According to Bloomberg, for the first time, India become the world’s fourth-largest stock market by market capitalisation.

India 4th Largest Stock Market 

• Market Capitalisation: On January 22, India’s market cap stood at $4.33 trillion as against $4.29 trillion for Hong Kong.
  • India’s stock market now stands as the fourth-largest globally, following the United States, China, and Japan, with a market cap of $4.33 trillion.
  • India’s stock market capitalization had crossed $4 trillion for the first time on December 5. 
• Market Dynamics in 2023: In 2023, Sensex and Nifty soared by 18.8% and 20%, respectively. BSE MidCap and SmallCap exhibited remarkable growth, jumping by 45.5% and 47.5%, respectively.

Factors Driving India’s Success

Growing Retail Investor Base: According to National Stock Exchange (NSE), number of stock market investors in India has surged past the 8 crore, registering a growth of 22.4% from the figure recorded on December 31, 2022.

• State Wise Investors: The state of Maharashtra tops the list of highest number of registered investors at 1.48 crore. 
  • Uttar Pradesh has ascended to the second position, surpassing Gujarat, with 89.47 lakh investors. 
  • Uttar Pradesh has recorded a growth of 33.8% in new investors.

• India’s Economic Resilience: India’s equity markets have demonstrated resilience, posting gains for eight consecutive years. 
  • The positive sentiment ahead of elections, improving macroeconomic conditions, and expectations of interest rate cuts have bolstered India’s economic outlook.
• Sustained Foreign Institutional Investments (FII): India has witnessed a substantial influx of funds from foreign portfolio investors (FPIs), who have become net buyers in the Indian stock market. 
  • Global pension and sovereign wealth managers also show a preference for Indian markets, according to a study.
• Robust Domestic Macroeconomic Fundamentals: India’s strong GDP growth, coupled with political stability at the central government level, has contributed to its ascent in the global stock market rankings. 
  • Reserve Bank of India has projected India’s real GDP to grow at 6.5% in 2023-24
• India as an Alternative to China: India has positioned itself as an attractive alternative to China, attracting global capital due to its stable political setup and a consumption-driven economy among the fastest-growing in major nations.
• Challenges in Hong Kong: Stringent anti-Covid-19 measures, regulatory crackdowns, a property-sector crisis, and geopolitical tensions, have eroded its appeal to investors.
• Valuation Eroded: Total market value of Chinese and Hong Kong stocks has plummeted by over $6 trillion since 2021, signaling challenges in China’s economic growth engine.
• Global Economic Divergence: Divergence in the economic paths of China and the United States has further influenced India’s rise. W
  • U.S. market demonstrated strength with eased inflation and a robust job market. 

Outlook for India

As India solidifies its position as the world’s fourth-largest stock market, the outlook remains optimistic. India’s economic resilience, coupled with global investors’ confidence, positions India as a key player in the evolving global economic landscape.

• Analysts anticipate that anticipated rate cuts by global central banks in 2024 could boost investor confidence, further fueling the Indian market rally.
• Budget Announcement: Investors are eagerly awaiting the budget announcement on February 1, with expectations that it could play a pivotal role in shaping market dynamics.

Also Read: 

• SECURITY MARKET IN INDIA
• Financial Market: Types, Functions, Role & Economic Impact