The National Stock Exchange of India has a total market capitalization of over $5.
Javier Ghersi | Moment |
India's Send 50 exceeds the S&P500 and analysts told CNBC the index could rise even higher this year.
The South Asian benchmark index has risen 11.8 percent so far this year, outperforming the S&P 500 by 9 percent and crossing the 25,000-point mark for the first time last week.
Traders are increasingly expecting the US Federal Reserve to cut interest rates in September and this environment could boost Indian equities. A rate cut in the US would give the Reserve Bank of India more room to ease monetary policy as a weaker US dollar strengthens the rupee and lowers global borrowing costs.
“Indian companies with dollar-denominated debt would benefit from lower interest expenses, which would improve their profitability and make their stocks more attractive to investors,” said Ayush Babel, global associate director of quantitative research at WisdomTree.
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India's Nifty 50 has outperformed the S&P 500 so far this year
Certainly, stocks plunged globally on Monday after a disappointing US jobs report reignited recession fears. Japan's Nikkei 225 plunged 12.4 percent on Monday, its worst trading day since the Black Monday crash of 1987, while the Nifty 50 fell just 2.7 percent.
Indian stocks have held up better than comparable stocks in the region for two main reasons, according to Malcolm Dorson, senior portfolio manager at Global X ETFs.
“India's growth is less dependent on US demand than countries like Taiwan and China. Second, India is still largely underrepresented among international investors. That's a strong and well-known story, but many investors were waiting for dips to buy. This may have been an opportunity,” Dorson told CNBC.
Babel predicted: “With continued momentum and a favourable macroeconomic environment, India is well positioned to achieve further growth of 5 to 15 per cent this year.”
“The psychological 25,000 mark acted as a momentum catalyst as round numbers attract the market's attention. Notably, the Nifty 50 rose from 20,000 to 25,000 in just 220 sessions, recording the fastest 5,000-point rise in its history,” said Babel.
The BSE Sensex also crossed the 80,000 point mark for the first time last Wednesday.
Unbroken optimism
This optimism is also supported by Prime Minister Narendra Modi's promise to make India the world's third-largest economy by 2030 and a developed nation by 2047. The National Stock Exchange of India already has a market capitalization of $5.19 trillion – the third-largest in the Asia-Pacific region – according to data from the World Federation of Exchanges.
The world's most populous country is also making great efforts to become a manufacturing power in Asia.
“Foreign investor interest is increasing and investments in India's manufacturing sector are growing exponentially. This is further supported by global supply chains considering manufacturing in India to offset geopolitical risks, particularly tensions between the US and China,” said WisdomTree's Babel.
The Financial Times reported in December that Apple had told its component suppliers that it would source batteries from Indian factories for the upcoming iPhone 16. Google is also reportedly planning to start producing Pixel phones in India this quarter.
Apple supplier Foxconn has announced plans to increase its investments in India, while Micron Technology is expected to produce the first Indian-made semiconductor chip in early 2025.
“Global investors are realizing that India is not just a flash in the pan, but also an opportunity to generate returns above the cost of capital, including for their children and grandchildren,” said Global X’s Dorson.
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