Recently, we have seen a lot of press coverage on the Indian and the US stock markets, both of which have been booming. In fairness, the Japanese stock market recently hit an all-time high, but this was after 34 years and in real terms, it is much different.

 

The APAC region currently dominates the global economy and is expected to strengthen this position going forward. So, how do the Indian and US stock market booms compare and contrast?

 

US stock market

 

While the headlines are very positive, if you dig a little deeper, you will see that the US stock market rally is based on one sector; technology. The sector performance is also dominated by the so-called "Magnificent Seven", which consists of:-

 

· Tesla

· Meta

· Alphabet

· Amazon

· Apple

· Microsoft

· Nvidia

 

At the moment, Microsoft and Apple are head and shoulders above the other five "Magnificent Seven", but they have all contributed to the ongoing rally. At the time of writing, they are up 80% over the last 12 months, which accounts for more than half of all US stock-market gains.

 

In comparison, when looking at the 4700 stocks traded in the US, the median stock is down over the last 12 months. This begs the question, do the headlines tell the underlying trend in the US?

 

Indian stock market

 

If we now look towards the Indian stock market, this rally is much more broad-based, and no one sector has contributed even 25% of total stock market returns over the last 12 months. The median stock in India is up more than 40%, with medium and small caps outperforming larger companies.

 

There is a growing opinion that Indian institutions and private investors are now pulling money from overseas and reinvesting it back into the Indian economy. Consequently, even though foreign investment in India continues to grow, it is at a slower pace than domestic investment. Looking back ten years ago, foreign portfolio investors owned 60% of the Indian stock market; this is now down to less than 40%.

 

Compare and contrast

 

If we dig a little deeper, we see that the amount of funding Indian investors hold in targeted investment plans has tripled to more than $100 billion over the last ten years. In the previous 20 years, the number of Indian companies listed on the stock market has increased by a factor of nearly 5, now standing at 2800. While this is still significantly less than the 4700 listed in the US, the US figure was down by 25% over the same period.

 

In the current decade, 180 companies listed in India have tripled in value with a market capitalisation of $1 billion or more. This increase in billion-dollar businesses is more than in any other country, including the US. As a final comparison, the US stock market is valued at more than $50 trillion, while India is currently valued at around $4.6 trillion, a vast difference.

 

Summary

 

While it is good to see stock markets recovering after various challenges over the last 10 to 15 years, seeing so much focus on technology stocks in the US is concerning. The more broad spread improvement in Indian stock market prices is encouraging, as is the comparative size of the two stock markets. Perhaps the difference between the stock-market valuations highlights the potential of the Indian stock market going forward.

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