The resilience of the Indian market while baffling is truly a domestic story, according to investor and author Ruchir Sharma. He was speaking as a part of the CNBC TV-18 Townhall on August 14. The strength of the Indian market, he noted has not been driven by foreign investors but by robust domestic activity. "The financialisation that's happened out here I think is staggering," added Sharma highlighting that banks are now struggling to get deposits as more people are investing in mutual funds. Sharma also notes that the Indian market remains a unique case as "the last bull market in the world standing, if not the only bull market of this decade."
India's market performance, Sharma adds has been unique. Today, India is "the most expensive market in the world" in terms of valuations but adds that in such a unique bull market, conventional valuation models may not matter. Sharma cites the example of Japan's market in the 1980s where despite concerns of overvaluation in Japan during that period, the market continued to double in value. Sharma adds that in such scenarios, where traditional models fail to predict market behaviour, investors may need to "suspend reality" and carefully observe the market's movements. However, he adds that volatility is inherent in momentum-driven markets, hence investors need to be vigilant while navigating such a market.
Over the last five years, Sharma added that the returns of the Indian market in dollar terms have even surpassed those of the United States. "There really has been no bull market in the world this decade like India," said Sharma.
The strength of the Indian market, he noted is also highlighted by its resilience. Despite recent concerns such as the introduction of long-term capital gains tax and various political developments, the Indian market has continued to climb, he explained. "Everyone said... that's going to take down the markets and guess what, it didn't," Sharma added.
This extraordinary market performance he added has contributed to wealth creation. "No country has created as many billionaires as India's created this decade," Sharma observed. India has more than 200 billionaires now, placing India among the top nations globally, with only the US and China surpassing it. The billionaire wealth in India, Sharma notes, as a share of the overall economy, is now 26 percent higher than in America. "This wealth creation has been broad, even in sectors like manufacturing that have otherwise stagnated," Sharma adds.
On India's Superpower, Sharma believes that it is India's federalism. "The fact that we have so many states which do their own thing... is the real big potential kicker for India," Sharma said, adding that there is a need for less centralization and more competitive federalism.
India's democratic resilience, Sharma noted comes from India being a true federal nation. This he noted, has continued to give him optimism, even when there is widespread pessimism about India's “political fabric”.
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