India to be Global #3 soon!

July 4, 2024 3 min read

Recently, we came across an infographic highlighted that India is now the fourth largest stock market in the world, with a market capitalization of around $5 trillion. This is a significant achievement, especially when considering the issues India faces domestically. Being among the top markets globally puts India in a strong position. The leading markets include the US at $52 trillion, China at $11 trillion, and Japan at $6.5 trillion. India’s growth in market capitalization is impressive and shows the country’s robust economic progress.

Source : Trinkerr

Closing the Gap with Japan and China

India’s market capitalization has been steadily increasing. The gap between India and Japan is narrowing, especially with Japan’s currency weakening. In US dollar terms, India could soon surpass Japan to become the third-largest stock market. If current trends continue, India might challenge China for the second position in the next few years. This shift would have significant implications, making India a must-invest market for global investors. As India’s market grows, it will attract more foreign investments, boosting its economic standing further.

Impact on Global Investments

Currently, India represents about 3.9% of the global market cap. Even as India’s market capitalization grows, the percentage of global investments in India has not skyrocketed. Foreign investors hold over 15% of Indian equity, down from over 20% in the past. However, as India climbs the ranks, becoming the third-largest market and possibly challenging for the second spot, it will likely see a surge in foreign investments. This growth will reshape how investors view India, making it a critical market to include in their portfolios.

Comparing Indian and US Investment Funds

When comparing the size of investment funds, US funds are significantly larger than Indian ones. For instance, BlackRock manages $9.8 trillion, and Vanguard handles $8.3 trillion. In contrast, the largest Indian mutual fund, SBI, manages $86 billion. Other Indian funds, such as ICICI Prudential and HDFC, manage even less. This comparison shows that there is substantial room for growth in the Indian market. As more companies go public and the government divests, the market will expand, creating more investment opportunities.

Future Growth !

India needs a continuous supply of new stocks and companies to meet the growing demand from investors. The market must avoid becoming too expensive and illogical compared to others. Therefore, we can expect many new IPOs and divestment plans in the coming years. This influx of new companies will help absorb the liquidity and keep the market balanced. The ongoing growth and new opportunities will likely attract more domestic and foreign investors, further fueling India’s economic progress.

Optimism for the Future

Despite being one of the most expensive emerging markets, India remains attractive to investors. Foreign institutions may not be heavily buying right now, but they are not underweighting India either. Domestic investments continue to flow, driven by optimism about India’s growth story. The next five to ten years look promising for India’s market. As India potentially moves into the top three largest stock markets, it could trigger a significant increase in inflows. The future looks bright for India’s market, and this positioning will play a crucial role in attracting more investments.

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    India to be Global #3 soon!