Vantage | Why investors love India's stock markets more than Hong Kong's

Global markets are witnessing a tug-of-war: India’s Dalal Street versus Hong Kong’s Hang Seng. They are going head-to-head for the title of the world’s fourth-largest stock market. The US has the biggest stock market, followed by China and Japan.

On Tuesday, India took the fourth spot; it went past Hong Kong. It was a fantastic start to what turned out to be a roller-coaster of a day. It was a rough day; Indian markets saw a lot of volatility. The day’s trade opened in the green but ended in the red.

The sensex crashed by over one thousand points, the nifty by over 300, and Hong Kong saw the opposite. Since last week, it has been falling, but on Tuesday, Beijing promised an intervention, so the Hong Kong stock market, the Hang Seng, gained almost three percent.

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Although this may not last, officials in Hong Kong remain nervous. So much so that they made a rare admission today. It came from John Lee, the chief executive of Hong Kong, who is not optimistic about the markets.

“I must say that market sentiment is rather sensitive these days. So I hope that everyone will closely monitor the markets, and act with caution. Government departments will closely monitor changes in the markets," said Lee.

“The market sentiment is sensitive” in Hong Kong. In India, that’s not the case. The Indian stock market is levelling up; it has beaten Hong Kong. India’s Dalal Street is bigger than Hong Kong’s stock market. This is an important milestone for Indian corporations.

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This is also a reflection on Hong Kong, which used to be Asia’s biggest financial hub. Though not anymore, India is poised to replace them. Despite today’s correction, major investors remain bullish on India.

India’s market cap stood at $4.33 trillion on Tuesday, as against $4.29 trillion for Hong Kong, according to data from Bloomberg. Currently, the US is the world’s biggest market with a market capitalization of $50.86 trillion, followed by China with a m-cap of $8.44 trillion and Japan at $6.36 trillion. As aforesaid, India is at number four now, and Hong Kong has slipped to number five.

India’s markets are worth $4.33 trillion, and Hong Kong’s is $4.29 trillion. It’s not a small difference. But in the coming days, it is expected to widen because the mood is changing.

Global investors are making long-term bets. For example, major sovereign wealth funds and public pension schemes are picking India over China. Last year, a think tank conducted a survey. It reached out to 100 funds, whose assets are worth 26 trillion dollars, and they were asked where they would like to invest. Most of them picked India. Then came Brazil and China.

As many as 40 funds had a positive outlook for India. Overseas funds in 2023 pumped more than $20 billion into the Indian stock market.

It is the steady growth that we have seen in the last eight years that is attracting them to India.

Indian stock markets have delivered gains and profits. In past years, Indian corporations have grown on the back of steady economic policies, policy reforms, and a largely stable political environment.

All of this has made India the growth engine for the rest of the world. This is the assessment of the International Monetary Fund (IMF), which considers India “a star performer”. India is projected to contribute more than 16 per cent of global growth. The momentum is expected to continue in 2024, as per the IMF projections.

There is no doubt that when India grows, Indian corporations benefit as well. That explains the bullish outlook. Plus, there’s one more factor: The decline of the Hong Kong market makes India a more appealing option. Hong Kong stocks are depreciating, and there is a rapid decline.

The Hang Seng see-sawed on Tuesday; the index closed in the green, rising almost three percent. But over the past five days, it has plunged by over 400 points, and Beijing is trying to steady it. The Chinese premier, Li Qiang, spoke about this on Tuesday. He wants the Hong Kong market to stabilise. Today, Li called for “forceful measures”. There is talk of stimulus; reports say Beijing is preparing a package worth around 278 billion dollars. The money will be used to make investments and stabilise the overall market.

So India may have gotten ahead, but it cannot rest on its laurels as China is fighting back.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost_’s views._

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