Stock Market: India Becomes 4th Largest Stock Market

PWOnlyIAS January 23, 2024 05:35 793 0

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

Stock Market: India Becomes 4th Largest Stock Market

Context

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.

india surpasses hong kong

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.

Stock Market

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.

Stock Market

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.

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Frequently Asked Questions

India's market cap of $4.33 trillion surpassed Hong Kong's, securing the fourth position globally.

Robust economic fundamentals, growing retail investor base, sustained FII, and positive macroeconomic conditions fueled India's stock market growth.

India surpassed 8 crore investors, growing by 22.4% in 2023, with Maharashtra leading and Uttar Pradesh witnessing significant growth

India's stable political setup, consumption-driven economy, and attractive market conditions make it an appealing alternative to China.

Stringent anti-COVID measures, regulatory crackdowns, a property crisis, and geopolitical tensions eroded Hong Kong's appeal, causing a decline.

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Stock Market: India Becomes 4th Largest Stock Market

Context

India 4th Largest Stock Market

Factors Driving India’s Success

Outlook for India

Frequently Asked Questions

Why is India now considered the world's fourth-largest stock market?

What contributed to India's stock market success in 2023?

How did the number of stock market investors in India change?

Why is India considered an alternative to China for investors?

What factors influenced the decline in Hong Kong's appeal to investors?

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