Foreign capital continues to be sought after, and the Indian stock market is "crazy"!

Hong Kong stocks decoded

2024-06-28 14:02Hong Kong stock decoding official account

The Indian stock market has gone crazy again.

In early June, Indian Prime Minister Narendra Modi won a third term, but his ruling coalition lost its parliamentary majority for the first time since 2014. The election results have sparked concerns about policy continuity, leading to massive capital outflows, with the Sensex index in Mumbai even taking a 5.74% dive in a single day.

However, as Modi's new coalition pledged to maintain policy continuity, investor fears quickly dissipated and renewed global capital inflows, coupled with already strong domestic capital, continued to drive India's stock index strength.

According to Wind data, as of June 28, the Indian SENSEX30 Index reached a high of 79,671.58 points, once again refreshing its historical high, with a cumulative increase of more than 7% this month.

Between 2016 and 2023, India's Mumbai Sensex Index has risen for eight consecutive years, and since the beginning of this year, the index has risen by about 10%, continuing to "soar".

At the same time, India's bond market has also been positive. From 28 June, Indian government bonds will be officially included in the JPMorgan Chase & Co. Emerging Markets Government Bond Index (GBI-EM), which may attract more foreign capital to the Indian bond market.

As for the strong performance of the stock market, some analysts believe that this reflects investors' optimistic expectations for India's economic growth.

According to the OECD, India's GDP growth rate will be above the center of 6% in the next five years, and the growth is considerable. In the context of de-globalization and industrial chain reshaping, the pan-Southeast Asian economies represented by India have relatively higher growth prospects.

However, there are also pessimistic voices that India's manufacturing industry is gradually hollowing out, and the proportion of India's manufacturing industry in GDP has dropped from 17% to about 13% in the past 10 years; In addition, the Indian stock market is currently trading at a price-to-earnings ratio of about 26 times, which is much higher than that of emerging developing countries, and there is a risk of valuation adjustment. Once the growth is less than expected, it cannot be ruled out that there will be a "Davis double kill".

In addition, India is currently facing the threat of a "water crisis", which has also attracted the attention of global capital.

A few days ago, Moody's, an internationally renowned rating agency, warned that severe water shortages could affect India's sovereign credit rating. If the water crisis destroys agriculture and industry, there could even be social unrest in India.

India is the world's largest producer of milk and spices, and the world's second-largest producer of rice, wheat, vegetables, fruits and cotton, with agriculture accounting for 90% of India's water consumption. India's water supply is mainly dependent on monsoon rains, which are prone to harsh and extreme weather conditions.

Moody's warned that water scarcity could disrupt agricultural production and industrial operations, leading to higher food prices and lower household incomes, which in turn could exacerbate volatility in India's economic growth and weaken the economy's resilience to shocks.

Overall, although India's capital market has shown a strong upward trend, it cannot ignore the risks involved, and investors should track India's macroeconomic performance and financial market performance in a timely manner if they participate in the Indian stock market, so as to avoid being "cut leeks" after chasing higher.

Author: Flying Fish

View original image 828K

•