The market value of India's stock market has surged past those of the UK and France to become the fourth largest in the world, thanks to a continuous inflow of foreign funds.
On June 20, Nikkei reported that strong performance by Indian companies has driven overseas investors to continuously pour into the Indian stock market since March, with the SENSEX index hovering near its peak.
According to QUICK FactSet statistics, as of last Friday (June 16), the total market value of the Indian stock market stood at $3.4 trillion, a 13% rise since March 31. It now ranks fourth globally, following U.S. stocks, China's A-shares + Hong Kong stocks, and Japanese stocks, accounting for 3.3% of the total market value of major global stock markets.
Last Friday, the BSE SENSEX index in India closed strongly at 63,384.58 points, refreshing the historical high closing record of the country's benchmark stock index. The BSE SENSEX index eventually closed up 0.25% at 63,327 today, rebounding more than 10% from the low point in March.
The Nifty 50 index, representing blue-chip stocks in India, closed up 0.33% today, hovering at historic highs along with the SENSEX index. It has been one of the best performing benchmark indices in the Asia-Pacific region this quarter, second only to Japan's Nikkei 225.
Last month, the total market value of the Indian stock market returned to $3.3 trillion, reclaiming the position of the fifth largest stock market in the world. In contrast, India was surpassed by France in January of this year.
Analysts pointed out that the annual reports of Indian companies released by the end of May showed strong profitability, further boosting the stock market.
Before India, the benchmark indices in Japan and South Korea also entered the bull market range. The Korean benchmark Kospi index has risen 20% from the low point on September 30; the Nikkei 225 index is at 33,000 points, a cumulative increase of nearly 25% since the beginning of the year, hovering at its highest level since 1990.
In fact, the Asia-Pacific stock markets have generally been on the rise recently. Not only Japan, South Korea, and India have shown strong momentum, but stock markets in Vietnam, Indonesia, and other countries have also performed well.
Analysts believe that the Indian stock market's impressive performance can be attributed to several factors:
First, the rebound of Adani Group's stocks after an investigative team stated they found no concrete evidence to support the allegations of stock price manipulation by the Adani Group made by Hindenburg Research. This boost helped the market value of Adani's ten listed companies increase by about $15 billion in a week, reducing the market value loss from $153 billion to $105 billion after the Hindenburg report was released.
Second, the frenzied influx of foreign funds. Bloomberg data shows that since early April, in pursuit of stable earnings growth, overseas investors have increased their holdings of Indian stocks by about $5.7 billion. This foreign capital inflow has been accelerating in recent weeks, with over $1 billion flowing in each week. Amid concerns of a global economic slowdown, many investors are seeing India as a safe haven.
Third, the interest rate market is betting that the Reserve Bank of India will end its tightening cycle soon and cut interest rates multiple times in the coming year. Data shows that India's retail inflation rate slowed to a 18-month low of 4.70% in April, far below the Reserve Bank of India's maximum tolerance level. Economists expect that future data will likely be below 6%, which increases the expectation that the Reserve Bank of India will pause its tightening cycle.
According to Reuters, Shrikant Chouhan, the head of equity research at Kotak Securities, implied that expectations of the Reserve Bank of India pausing its rate hikes have triggered optimism among those sensitive to interest rates.
Morgan Stanley's chief Asian economist, Chetan Ahya, wrote in a report that the Indian economy is becoming increasingly strong. The upcoming recession in the U.S. could put pressure on the profitability of companies in Asian export-oriented economies. In contrast, the Indian stock market appears to be a more attractive option at present.
A report from Bank of America Securities on Tuesday also said that India has "leapt" from the bottom of the preferred list of Asian fund management companies to a net increase in holdings.
