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HomeCURRENT AFFAIRSBUSINESSDragon in Trouble? China's $20 Billion Capital Shifts to Indian Stock Market

Dragon in Trouble? China’s $20 Billion Capital Shifts to Indian Stock Market

India shines as a beacon for international investors amid China's economic difficulties, drawing a substantial $20 billion in foreign investment in only one year.

China Stock Market: For a while now, there has been intense pressure on China‘s stock market, which is making both local and international investors (FIIs) anxious. The current situation is that a significant portion of international investors are switching from the stock market in China to the stock market in India. According to a Reuters article, international investors are flooding India’s $4 trillion stock market with money.

Indian Stock Market Gains Favor as China’s Substitute

As to the survey, investors are perceiving the Indian Stock Market as a substitute for China, whose economy is presently experiencing the quickest growth rate globally. However, as a result of the significant drop brought on by China’s uncertainties, investors are pulling out of the Chinese market.

Indian Stock Market Witnesses Unprecedented Foreign Investment

In the past year, foreign investment in the Indian stock market has reached historic levels. The NSE Nifty 50 index has increased by 23.74%, or more than 4,200 points, in the past year, which is another way to measure this. Data from India’s National Depository indicates that throughout the previous ten months, there has been a one-third growth. In 2023, foreign investments of $20 billion were made.

Why People are investing in Indian Market

  • Global investors are looking for an alternative to the falling Chinese market, for which the Indian stock market seems to be a strong contender.
  • Global investors are hopeful that he will come to power by winning the national elections for the third time.
  • The Indian stock market has given record breaking returns in both short term and long term.
  • Experts believe that despite the recent rally and the upcoming elections, India’s stock market will be good for long-term investors.
  • Goldman Sachs believes that the Nifty index is currently around 22,000, which will reach 23,500 by the end of 2024.
  • Retail investors are joining the stock market in large numbers every day and an average of $2 billion per month is being bought by domestic institutional investors.
  • IMF estimates that India’s GDP will grow at a pace of 6.7 percent in 2024, while China’s GDP growth estimate is 4.6%.

Indian Stock Market Ranks Among Priciest Worldwide

Currently among the priciest stock markets globally is the Indian stock market. The 12-month price to earnings ratio for the Nifty 50 is 22.8, which is three times greater than that of China, according to LSEG statistics.

This exceeds the US S&P 500 valuation of 20.23. Domestic investor investment has surged at a quick pace alongside that of foreign investors. In 2023, domestic institutional investors received inflows above $22 billion. Due to this massive investment, domestic stock ownership in India is presently 35.6%, while foreign ownership is 16%. The promoters own the remaining portion.

Chinese Stock Market Faces Significant Decline

The Chinese stock market is experiencing a significant fall. In just three years, China’s market value has decreased by $7 trillion. On Monday, the CSI 1000 index in China dropped by over 8% in a matter of hours. Large-cap indices such as the CSI 100 saw a 1.03 percent increase to 3,042.52, but the index plummeted over 400 points, or 8.68 percent, to a low of 4,177.94. In January, the CSI1000 index has dropped by 27% thus far. In the past year, there has been a 38 percent decrease.

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