Hit a new high, rising for eight consecutive years!

India, the world's fifth-largest stock market, hit a new high, with a market capitalization of nearly $4 trillion.

On Monday, financial and energy stocks pushed India's stock market to record highs, with a total market capitalization of $3.93 trillion, driven by key victories for the ruling party in state elections. Previously, strong macroeconomic data and a slowdown in global interest rate expectations had boosted the Indian market.

The market capitalization of securities listed on the Indian exchange has tripled as of Friday since the lows of the pandemic in March 2020, with India's NSE Nifty 50 index climbing to a new record on the day, according to data compiled by Bloomberg.

So far this year, overseas funds have injected more than $14 billion into local Indian equities, and the Indian stock market has also received a steady boost from the retail investment boom that began during the pandemic. As of 2023, the Nifty index has risen nearly 14%, rising for eight consecutive years.

According to media reports, stock purchases by local institutions, including mutual funds and insurance companies, have climbed by more than $16.5 billion so far this year, driven by continued inflows of retail investors.

What is the basis of the Indian stock market?

The first is that the fundamentals are good. India's GDP grew 7.6% year-on-year in the third quarter as of September, standing out against the backdrop of slowing global growth, enhancing the attractiveness of its stock market to foreign investors.

According to Morgan Stanley's forecast, the Indian stock market is expected to remain 10% above the global emerging market standard for three years.

The second is that the government's market-friendly policy, coupled with India's abundant young labor force, has given India an advantage in the global supply chain.

According to related reports, Indian Prime Minister Narendra Modi is also committed to shifting the country to a manufacturing-driven economic model to support infrastructure and heavy industry enterprises, which is good for Indian industrial stocks and energy stocks.

The report quoted a report released on November 11 by JPMorgan Chase & Co. strategist Rajiv Batra's team:

"In addition to structural commitments, we believe factors that will drive the market higher in the near term include strong activity data, impressive corporate earnings, lower oil prices, and strong domestic inflows. ”

A new study by the Forum of Official Monetary and Financial Institutions, a London-based think tank, shows that global pension and sovereign wealth managers are flocking to India.

Another boost is the increased likelihood of Modi's re-election, which greatly reduces political risks. The results of last weekend's election showed that India's ruling Bharatiya Janata Party (BJP) won key victories in three of the four state assembly elections, which is conducive to Indian Prime Minister Narendra Modi's re-election bid in May next year, further boosting market sentiment and the Indian stock market is expected to continue to rise.

Matthew Haupt, portfolio manager at Wilson Asset Management, said:

"Its role (the BJP local election victory) is to boost investor confidence and prolong the duration of trading in the Indian market. ”

"We are likely to see a continued inflow of capital into India. ”

There is currently a risk of high valuations

On the flip side of India's stock market boom are concerns that the market is overvalued and the stock market is crowded.

On the other hand, the influx of retail investors may also pose challenges to market regulation. In November, foreign investors became buyers of the Indian stock market for the first time in three months, according to media data.

There is a view that these market sentiments may increase the likelihood of a subsequent correction in the Indian stock market.