According to a new report by Deutsche Bank, the Indian stock market has continuously outperformed the Chinese stock markets since 2000. The report states that although China’s economy has grown at a rapid pace, the performance of its stock market values has been mediocre on average. The actual return of China’s stock market has averaged only 4 percent annually. By contrast, India has become a leading investment destination in both emerging and developed markets, with investors achieving real returns on its stocks of over 6.9 per cent.
India’s 6.9 percent real yield
The report projects that India’s real equity return of 6.9 per cent will be the highest among major emerging markets (EM) and developed markets (DM) between 2000 and 2024. During this period, India has outperformed results than other countries, which strengthens their economic and investment prospects.
India’s competition with the United States
The report also says that by 2024, India and the United States are among the countries trading at record CAPE (cyclical adjusted price-earnings) ratios. The CAPE metric calculates average earnings over a 10-year period, smoothing out cyclical fluctuations. However, this does not fully reflect the structural changes. According to the report, the CAPE ratio of the US S&P 500 was at record levels in the early 2000s and at levels not seen since, although it has now returned to an all-time high after declining at the beginning of the century.
Investor confidence despite valuation
The report also mentions that despite inflated valuations in India, investors are willing to pay a premium for it. This is due to India’s positive growth prospects and its role as a major player in global markets. According to the report, America’s technological dominance, advances in Artificial Intelligence (AI), and structural changes in earnings expectations help justify these inflated valuations.
Perspectives from India and America
The report also says that both India and the United States will begin the next quarter century (2025-2049) in a strong economic position. However, the stock markets of these countries continue to be expensive and with more generous valuations. This speculation is an important opportunity for the markets of these countries, since their growth will depend on their structural strength and investors’ confidence in their future prospects.
Therefore, India’s strong growth prospects and its growing influence on the global economic situation will keep it an attractive destination for investors in the years to come.
