India's Equity Market Surpasses Half the Size of the Chinese Market

India's equity market has achieved a significant milestone by surpassing half the size of the Chinese market. According to data sourced from Bloomberg, India, currently the fifth-largest stock market in the world, commands a market capitalization of $4.35 trillion, which amounts to 50.3% of the Chinese market. This significant shift in market dynamics indicates the growing strength and attractiveness of India's equity market.  India Closes the Gap with China's Market Until about a year ago, India's equity market accounted for less than a third of the Chinese market. However, with recent developments, India has substantially narrowed the gap with the bourses in Mainland China. The combined market capitalization of stocks listed in China stood at $8.66 trillion, as of the latest available data. In contrast, the Chinese stocks witnessed a decline of 34% or $4.4 trillion from their 2021 peak, while India added close to $1 trillion or 29% during the same period. India's Growing Contribution to the Global Market With its increased market capitalization, India now accounts for approximately 3.9% of the world market, compared to less than 3% at the beginning of April 2023. On the other hand, the contribution of Chinese stocks to global equities has decreased to 7.8% from 11.5% in July 2022. This shift highlights the rising prominence of India's equity market on the global stage. Challenges Faced by China's Market The significant erosion in Chinese stocks reflects the challenges China has been grappling with in its efforts to revive falling investor confidence. Global investors have been reducing their exposure to the Chinese market, as the country's economy continues to recover from the impact of the pandemic. Furthermore, the recent turmoil in the Chinese property sector has exacerbated concerns and further dented investor sentiment. India's Soaring Stock Market Performance In contrast, India's stock market has witnessed a relentless rally, driving the country's valuation multiples to new heights. Currently, India is trading at 20 times forward earnings estimates, compared to its valuation a year ago, while China's market trades at a modest 9.6 times forward earnings estimates due to continued sell-offs. Notable Companies Driving India's Market Growth Amidst the exuberance in the Indian market, several companies have significantly contributed to the country's market capitalization over the past year. Among these are blue-chip companies like Reliance Industries, Bharti Airtel, Larsen & Toubro, and others. Interestingly, even seven companies from the public sector undertakings (PSUs) have featured in the list of companies that added more than ₹1 lakh crore to their market valuation. The PSU basket includes companies such as IRFC, LIC of India, NTPC, ONGC, Hindustan Aeronautics, Power Finance Corporation, and Coal India. Positive Market Sentiment and Reforms The remarkable performance of the Indian stock market can be attributed to the expectation of robust earnings growth and the country's economic growth forecast of over 7% in the coming years. Additionally, policy continuity at the center and ongoing economic reforms have further bolstered market sentiment. As India's equity market gains prominence, it is expected to attract further attention from global investors and contribute to the country's economic growth and development.