India’s equity market is on the verge of passing the U.K. in value to enter the world’s top-five club, almost by one measure. The plausible action arrives as record-low interest rates and a retail-investing increase thrust stocks in India to record highs.
According to an index organised by Bloomberg, India’s market capitalisation has risen 37% this year to $3.46 trillion, serving the merged value of businesses with a primary listing there. That’s meeting with the U.K., which has seen a rise of about 9% to $3.59 trillion, though the number is much more significant if secondary listings and depositary receipts are involved.
As the two markets meet in size, India’s higher growth potential and an active technology area that’s seen a surge of startups going unrestricted this year give the growing market an advantage, significantly when the attitude toward Chinese investments has curdled. As for the U.K., questions related to Brexit proceed to show on the market.
“India is seen as an attractive domestic stock market with good longer-term growth potential from an immature economy, and a stable and reformist political base is helpful in realising this potential,” Roger Jones, head of equities at London and Capital Asset Management, wrote in emailed comments. “On the other hand, the U.K. has been out of favour since the Brexit referendum outcome.”
The S&P BSE Sensex, the critical index of the Indian bourse BSE Ltd., has risen more than 130% since its dip in March last year, the most among major national benchmarks followed by Bloomberg. It has given investors an annualised return of almost 15% in dollar terms over five years, more than double the 6% for the U.K.’s benchmark FTSE 100 Index.
According to Goldman Sachs Group Inc, India’s share-market capitalisation will increase to $5 trillion by 2024. Nearly $400 billion of market value could be calculated from new IPOs over the next 2-3 years, analysts led by Sunil Koul wrote in a note last month.