India vs China Race: One step forward
Thursday, Dec 14, 2023
India vs China Race: One step forward
Fifth largest economy, fastest growing emerging country, poised to become third largest economy by 2030- these are a few adjectives anyone would define India by. The list doesn't end here. Hi, In today’s episode of Indian markets reaching new heights, we will discuss India achieving its not surprising yet gratifying milestone recently.
In our last newsletter, we discussed how even though India hasn’t become a $4 trillion economy yet, it achieved $4 trillion market capitalization. With this, India overtook Hong Kong Stock Exchange and became the seventh largest trading venue in the world. As of the end of November, the total market capitalization of the National Stock Exchange of India was $3.989 trillion versus Hong Kong’s $3.984 trillion, according to data from the World Federation of Exchanges. A trillion dollars have been added in just the last three years.
Source: Financial Times
It would be fair to say that a plenty of factors have worked in favor of India and at the same time a plenty have conspired against China. Though the problems started long back with the US China trade war and accelerated with Covid 19, I’ll try to keep it as short as possible. Rather than having a theoretical discussion on this, we’ll discuss facts and data. So let's begin.
Before discussing what led to China where it is today, let's review performance of both the indexes.
While Nifty has gained approximately 13.5% in the last one year, Hang Seng has fallen by almost 17%. Looks bad right. If the left chart has left you dumbfounded, there’s another one- the right one. This chart compares the performance of both the indexes in the last 5 years. 95% gain in NIFTY50 vs -37% downgrade in Hang Seng. Essentially it means that if one had invested in China’s index, he would have not gained anything but wealth erosion.
This was all about the performance of the two indexes. Lets now talk about the investment flowing in both the countries in the form of Foreign Portfolio Investments.
Although the scale is very different for both the charts, we can see the difference between the two. Recently, FPIs have started pulling out their money from China and investing in emerging countries like India especially on the back of China plus one. Not even investors, even large MNCs are shifting their base from China to India, prime example being Apple. Apple, which has the bulk of its manufacturing base in China, has asked component suppliers to source batteries for the upcoming IPhone 16 series from India. This is huge for India as China’s manufacturing wave kind of started with Apple only.
Let us now look at a few pointers that underscore the reasons behind people, foreign investors and the word believing in India’s potential.
Outlook: Rising high reaching the sky
Moody's Investor Services recently retained India's economic growth forecast at 6.7% for 2023, citing the country's remarkable resilience amid a global slowdown buoyed by solid domestic demand.
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