India was the fastest-growing large economy in the world in 2023 and is expected to maintain this status in 2024 as well. It wouldn’t be surprising to see international investors seeking growth turning their attention to the Indian economy. Post-COVID, the Indian markets have been bustling with activity.
“India has a compounded past and a compounded future.” The index is poised for an eighth consecutive year of gains, up by more than 15% year-to-date.
“India’s economy is a sleeping giant. Once it awakens, it will be a force to be reckoned with” – Jack Ma, Alibaba Founder
With its combination of a low GDP per capita and the largest population globally, coupled with ongoing modernization efforts, India presents tremendous potential for further growth. While following positive sentiments prevail, it’s important to acknowledge that unforeseen events, such as those seen during the Russia-Ukraine and Israel-Gaza conflicts, can potentially introduce negative news into the equation.
Rate cuts: Nomura analysts anticipate the Reserve Bank of India to extend the policy pause and expect cumulative rate cuts of 100 basis points, starting from August 2024. Lower lending rates typically enhance liquidity and foster a more risk-taking sentiment in stock markets.
Political stability: According to DBS senior economist Radhika Rao, “The ruling Bharatiya Janata Party (BJP) outdid its national and regional rivals in the recently held state elections. This strong performance has bolstered expectations of political stability for the upcoming general elections in April/May 2024, addressing earlier concerns of a potential fiscally populist agenda.”
Earnings growth: HSBC forecasts a robust earnings growth of 17.8% for India in 2024 — one of the fastest rates in Asia.
Increased liquidity: HSBC notes that while foreign investors typically focus on large caps, local investors dominate the small and mid-cap space. This partly explains the outperformance, with fund flows into midcap-small schemes of domestic mutual funds being disproportionately high. This trend is expected to persist into the next year.
Valuations: Despite recent increases, valuations remain supported by robust earnings growth, surpassing long-term averages.
India boasts the fifth-largest forex reserve worldwide.
India is the only country in the world to have reduced debt following the global financial crises.
Six of the world’s top 10 fastest-growing cities in 2022 are in India.
India’s IT exports now exceed the oil exports of Saudi Arabia, the world’s largest oil exporter.
In 2008, when crude oil touched $100, India’s GDP was 33% of Brazil & Russia combined. Today, India’s GDP equals the combined GDP of Russia and Brazil.
More than half (54%) of NSE 500 stocks have generated over 10x returns within a 5-year rolling period since 2000, the largest proportion of multi-baggers among 10 major markets globally.
