Indian Markets Outshine Global Counterparts with Strong Performance

In the financial year 2023-24, Indian markets have experienced a significant surge, outperforming their global counterparts. According to a report by DSP Asset Managers, while global market conditions appear uncertain, India's economic conditions remain reasonably stable.

Several indicators contribute to this positive outlook, including healthy GST collections, robust sales volumes of petroleum products, promising electronic toll collections, and a strong overall business activity with positive sentiments.

Despite multiple countries grappling with inflation and striving to bring it within target bands by implementing interest rate hikes, India stands out with softening inflation. The downward trajectory of inflation is evident in inflation models and the Reserve Bank of India's decision to pause the rate hike cycle, as highlighted in the report.

Vikram Kasat, Head Advisory at Prabhudas Lilladher, notes that the Nifty index has surged over 5 percent in the financial year 2023-24, while global markets have experienced a decline. Several factors contribute to this exceptional growth in the Indian markets. These factors include the end of the Reserve Bank of India's modest rate hikes, foreign institutional investors (FIIs) returning to India, robust growth in the manufacturing industry, record-breaking exports, ongoing recessions in the United States, cooling off of commodities, the "China plus one" strategy, the "Europe plus one" concept, the Make in India initiative, and various production-linked incentive (PLI) schemes and incentives. Together, these factors have consolidated to propel Indian markets to new levels.

Kasat further mentions that "Europe plus one" has become the new "China plus one" strategy due to poor gas supply, leading to shortages, blackouts, and shutdowns in Europe. This has once again made India an attractive investment destination.

The global economy has faced two significant shocks within a span of three years, and it may be on the brink of a third in the form of a US debt crisis, as reported by CNN. The possibility of the American government being unable to meet its financial obligations has sent ripples through financial markets, evoking fear due to its potentially devastating consequences. A default scenario could surpass the impact of the 2008 global financial crisis.

The fallout from a default would be catastrophic, as noted by Danny Blanchflower, an economics professor at Dartmouth University and former interest rate-setter at the Bank of England. The implications of America's government failing to pay its creditors on time would be frightful, as the belief in the Treasury's commitment to honor its financial obligations underpins the smooth functioning of the global financial system. The US dollar's status as the world's reserve currency and US Treasury securities serving as the foundation of bond markets worldwide rely on the credibility of the Treasury's payment commitments.

Furthermore, CNN reported that stocks of Chinese companies worldwide have experienced a collective loss of approximately $540 billion. Investors have reduced their exposure to China due to economic uncertainties, rising geopolitical tensions, and Beijing's crackdown on international consulting firms. Concerns over the robustness of China's recovery and fundamental investability, including geopolitical and policy risks, contribute to global investors' skepticism towards China.

Michael Kelly, global head of multi-asset at PineBridge Investments, points out that tensions between China and the US have risen after two decades of mutual benefit, further impacting global sentiments towards China.

In conclusion, Indian markets have demonstrated strong performance, while global markets face challenges. India's economic stability, supported by positive indicators, favorable policies, and various growth initiatives, has positioned it as an attractive investment destination. However, uncertainties in the global economy, such as the potential US debt crisis and concerns surrounding China, continue to impact investor sentiment on a broader scale.