India Surpasses Hong Kong As World’s Fourth Biggest Stock Market

January 23, 2024

India’s equity market capitalization has surpassed Hong Kong’s for the first time, making it the fourth largest globally. Favorable domestic growth dynamics combined with global capital inflows have powered India’s market rally.

Crossing $4 trillion milestone

As of January 23th, the total valuation of companies listed on Indian stock exchanges reached $4.33 trillion. This surpasses Hong Kong’s $4.29 trillion market capitalization. Only the US, China and Japan have larger equity markets now. This achievement caps India’s rapid stock market expansion – its market cap doubled from $2 trillion in just four years.

Driving forces

Robust participation from Indian retail investors and steady foreign inflows have lifted domestic stocks. Strong corporate earnings growth in the post-pandemic rebound has also helped. Furthermore, India’s stable political climate and pro-reform policies have enhanced its appeal.

Outperforming China/Hong Kong

While India’s stock market breaks records, Hong Kong has struggled recently along with mainland Chinese equities. Strict COVID curbs, property sector woes and regulatory tightening have hampered China’s economy, sparking a historic market rout. These headwinds have drained over $6 trillion from Hong Kong and Chinese market value since 2021 peaks.

Ongoing momentum

Analysts see India’s stock market uptrend continuing, underpinned by economic expansion and supportive policies. India remains one of the world’s fastest growing major economies. In contrast, near-term optimism on Chinese/Hong Kong shares remains muted given growth downgrades.

Global capital redirection

The diverging fortunes have triggered a capital shift from Hong Kong towards India. Foreign investors poured over $21 billion into Indian shares just in 2022. Global institutions are also increasing India exposure, considering its long-term potential. This capital redirection has further reinforced relative market performance.

Key risks

Valuations of Indian equities are getting stretched after the breathless rally, potentially limiting further near-term upside. Moreover, global growth worries could spark capital outflows. However, positive structural factors suggest India’s market should continue outpacing Hong Kong over a long-term horizon.

Looking ahead

Sustaining growth momentum through infrastructure upgrades, policy reforms and private investment will be key for India to press its advantage. With the global spotlight on India, further enhancing market access, regulation and governance will also help secure its position among the world’s top equity hubs.

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