India leads top 10 league with 13.77% surge in market value

India remains the world's fifth largest equity market with a valuation of $3.48 trillion.

With a 13.77 percent surge, Indian equities have recorded the maximum expansion in market value among the top 10 nations in the June quarter so far, thanks to robust inflows from foreign investors on the back of an improving macroeconomic  fundamentals.

The world's fifth largest equity market with a valuation of $3.48 trillion, India  recorded the sharpest increase in aggregate market capitalisation since the December 2020 quarter, Bloomberg data shows .

The US, with a market capitalisation of $45.90 trillion, saw an aggregate expansion of 6.38 percent, while China's $10.02-trillion market recorded an 8.46 percent decline, which was the steepest among the top 10 markets in the June quarter.

Japan's $5.83-trillion market expanded by 3.11 percent but the $5.13-trillion Hong Kong market contracted 5.19 percent. France saw a 1.69 percent decline, while the United Kingdom gained a meagre 0.14 percent. A 9.5 percent spike made Saudi Arabia the second in the league in terms of expansion, while Canada saw a 1 percent fall.

Markets remained subdued in the past few quarters amid escalating geo-political tension in Russia and expectations that the global central banks will start hiking the rates further.

According to Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, the ongoing market rally would sustain irrespective of the geopolitical concerns and a likely monsoon deficit. “Our outlook suggests that the rally is unlikely to be affected by a potential Fed hike, too, as all these are already factored into market expectations,” he said.

The rally in Indian markets kicked off on March 28 and the benchmark Sensex and Nifty have advanced nearly 10 percent each since then, while the mid-cap and small-cap indices have jumped over 20 percent each.

This impressive growth can be attributed to a multitude of factors, including favourable macroeconomic indicators such as the decision by the Reserve Bank of India to pause the interest rates, inflation cooling off below 5 percent, and a GDP growth surpassing expectations, analysts said.

Gaurav Dua, SVP, Head - Capital Market Strategy, Sharekhan by BNP Paribas, said an upbeat mood in global equity markets has contributed to the upswing in Indian equities. India's resilience and strong corporate earnings have outperformed most developed markets, attracting a higher share of  foreign inflows.

"Unlike previous rallies, there is no euphoria this time, as retail investors are cautious and have preferred to secure profits rather than chase momentum. With the Nifty consolidating in a 2,000-point range and healthy corporate earnings, the rally is expected to continue in the short term, while the Indian economy's multi-year upcycle suggests healthy gains in the next 3-5 years," Dua said.

According to Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities, superior earnings growth and persistent flows are the main pillars of this rally. He believes as long as these two cylinders are firing, markets are likely to keep surpassing new highs and generate superior return for investors who believe and keep faith in India’s growth story.

"We expect emerging markets and especially fast-growth markets like India to attract a higher proportion of incremental foreign flows.  Domestic investors are diversifying their investments and the longer-term trend of financialization of saving is helping garner continuous flows into mutual funds and insurance companies," he said.