Much has been made of the Indian equities market, as measured by the narrowing market capitalisation gap between the BSE (Bombay Stock Exchange) Index and the Hang Seng Index. As at Dec 8, the market cap of Indian equities stood at US$4.24 trillion ($5.69 trillion) versus that of the Hong Kong market at US$4.66 trillion (see Tables 1 and 2). As at Dec 8, the Hang Seng Index is down 18.9% this year, while the BSE is up 14.8% in the same time-frame. In comparison, the Straits Times Index has lost 4.3%.
Based on data from the Singapore Exchange S68 , the market cap of the Singapore market as at end-November was $765 billion. Hence, the Hong Kong market is 9x bigger than Singapore and the Indian market is 8x bigger than Singapore. This is because the Hong Kong market is often viewed as a proxy to the China market.
Similarly, the commercial centre of India, Mumbai, has the largest exchange in India. Like Hong Kong, the Bombay stock market is broad and deep because of the Indian hinterland. Singapore does not have a hinterland.
The Edge Singapore’s senior financial analyst, Thiveyen Kathirrasan, says among the biggest companies listed on the BSE, and based on the analysts’ sentiment for these companies, Tata Consultancy Services and Infosys are leaning towards being fairly valued or slightly overvalued.
For the Indian banks, using a price-to-book ratio, HDFC Bank is trading below its mean, while ICICI Bank and State Bank of India are both trading above their mean. As for the high P/E stocks, Kathirrasan says their valuations could indicate a high growth potential.
Morgan Stanley says its base case is for Indian equities to rise “into the 2024 general elections as the market is likely to price in continuity and a majority government”.
“The fundamentals are underpinned by strong macro stability as a result of improving terms of trade, flexible inflation targeting and stable non-portfolio foreign flows,” the recent Morgan Stanley report says. It is estimating a 20% earnings growth a year over the next four to five years led by a private capex cycle, re-leveraging of balance sheets, a structural rise in discretionary consumption, and a reliable source of domestic risk capital.
Morgan Stanley’s favourite sectors are consumer discretionary, industrials & technology, and financials.
For local investors, the easiest way to get access to the Indian market is through the Amundi MS India ETF listed on the Singapore Exchange. The most liquid proxy to the Indian market is CapitaLand India Trust CY6U , unchanged year-to-date despite a 5% decline in the FTSE REIT Index.
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