The reason why the Indian stock market can get out of ten -year -old cattle is inseparable from its strong economic growth level, relatively stable monetary policy, and the improvement of corporate profitability.In addition, the recent sharp return of foreign capital has also brought confidence to the Indian stock market.
1. Strong economic growth
The third quarter of GDP recently announced by India has increased by 7.6%year -on -year, and it is topped in the global economy.The growth rates in the first three quarters were 6.1%, 7.8%, and 7.6%, surpassing many developed countries in Europe and the United States.
In terms of elongation, the average growth rate of GDP in India has reached 6.43%in the past 20 years, accounting for the continuous increase in global proportion.As of the end of 2022, India’s total GDP reached 3.39 trillion US dollars, surpassing Britain to become the fifth largest economy in the world.The good economic growth and fundamental aspects provided strong support for the rise of the Indian stock market year by year.
Second, the advantages of the demographic dividend
When it comes to India, the most important thing must be a dividend.In 2021, India’s population approached 1.4 billion, accounting for 17.85%of the total population of the world. With the decrease in India’s new population, the United Nations predicts that India will surpass India in 2023 and become the world’s largest population.
And India is only 6.78%at the age of 65 and above, significantly lower than 17.04%of the United States, 14.2%of India, and 28.7%in Japan. The age advantage is obvious.According to this trend, the demographic dividend can last for a long time, ensuring the future development potential.
3. The stock market system is relatively complete
First of all, India’s securities market has a long history.Mumbai Stock Exchange was established in 1875 and is the oldest stock exchange in Asia.In order to attract foreign investors, the Indian stock market is established in accordance with international standards, allowing capital to enter and exit freely, and the short -term mechanism is improved.Compared with emerging market economies, the Indian stock market has copied the rules of the European and American stock market trading rules, and the degree of liberalization in the market is relatively high.
Secondly, the Indian delisting system is relatively strict.The Indian stock market has formulated specific delisting standards, and analyzes the relevant situation of listed companies from multiple perspectives such as financial performance and assets and liabilities.Under such a "wide -entered supervision" system, listed companies are facing the pressure of "survival of the fittest", and the company’s operating illegal regulations, merger and separation, and bankruptcy will be forced to delist.
4. Improvement of valuation and profit
The key driver of India’s ten -year -old cattle is also the valuation of the central bank’s easing policy.During the decade, the BSE500 ingredients PE increased from 13.10 times to 30.52 times.The rapid development of the Indian economy helps to improve the profitability of listed companies, and the income per share tends to be stable.
From the perspective of market value structure, finance (29%), information technology (22%), energy (15%), daily consumption (11%) and materials (6%) are the five industries with the largest market value.From the perspective of EPS, India’s profit was affected in 2020, but after 22 years, it was repaired and basically returned to the trend of historical growth.Mumbai Stock Exchange
However, after this year’s rise, the Indian stock market has a slightly higher valuation compared to other emerging market countries.As of September 30, 2023, the PE value of the Mumbai Sexsen30 index was 20.89, which was near 26%in the past five years.Many investors worry that the current Indian stock market has the risk of crowded and callbacks in transactions.
To sum up, the Indian market has gone out of the trend of ten years, thanks to the rapid development of the Indian economy, good fundamental fundamentals and demographic dividend advantages.Coupled with the improvement of the stock market system and the steady rise in profitability, it has brought strong support to the Indian stock market.
As an emerging country, there are also some potential risk points in the Indian market. For example, the Indian stock market is overly dependent on foreign capital. From the perspective of the shareholding structure, India’s foreign investment ratio is about 38%, resulting in high volatility in the stock market.At the same time, after the inflation slowed down in the first half of the year, India’s July CPI growth rate of more than 7%year -on -year, showing signs of inflation again.After the rapid rise in the first half of the year, a short -term risk of callback was also faced in the short term.
On the whole, the Indian stock market, as a pearl of the emerging country market, is of great significance in overseas asset allocation, and it is expected to continue the trend of long bulls in the future.For domestic investors, you can invest in the Indian market through QDII Fund to share the growth bonus of emerging economies.
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Simla Wealth Management