Indian stock market surges as foreign funds buy into national growth story

The overall value of India’s stock market has surged more than 14 per cent in the past three months as foreign investors buy into the robust economic growth of the world’s most populous country.

The $440bn increase in the value of Indian equities to more than $3.5tn means India has climbed well above both France and the UK to regain the status of the world’s fifth-largest stock market after the US, China, Japan and Hong Kong.

The Sensex index, which tracks India’s 30 biggest companies by market capitalisation and is weighted towards financial stocks, has been climbing steadily for the past three months and hit a record 63,588 points on Wednesday, spurred by buying from foreign pension and insurance funds.

“Foreign institutional investors are playing the role of the catalyst in the current rally,” said Vijay Chandok, managing director of Mumbai-based ICICI Securities.

India’s stock market value surpassed that of France in early 2022 but suffered a sharp sell-off at the start of this year that briefly left it trailing both the French and UK markets.

Indian equities now account for about 3.3 per cent of global stock market capitalisation, according to Bloomberg data.

India’s prime minister Narendra Modi, who is in the US on a state visit this week, has been promoting India as an investment destination and alternative manufacturing base to China.

The gains for Indian shares follow a short-seller attack on the ports-to-power Adani Group in January that wiped about $145bn off the market capitalisation of its seven listed companies. The Adani company stocks, which are not included in the Sensex index, have since rebounded but are still generally below their pre-January levels.

India’s robust recovery from the coronavirus pandemic contrasts with the performance of many Asian peers and growing investor concern about the economic health of China, which India surpassed as the world’s most populous country this year.

The IMF estimates India’s economic growth for 2023 will be 5.9 per centt, compared to 5.2 per cent in China and 1.6 per cent in the US.

Source: The Financial Times