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India has recently achieved a significant milestone by surpassing Hong Kong to become the world’s fourth-largest stock market. This achievement is backed by a robust year in 2023, where Indian stocks reached new heights, propelled by bullish investors and increased domestic participation. The market capitalisation of India’s stock market reached $4.33 trillion, surpassing Hong Kong’s $4.29 trillion, according to data from Bloomberg.

The top five stock markets in the world now stand as follows: the United States leads with a massive $50.86 trillion market cap, followed by China ($8.44 trillion), Japan ($6.36 trillion), India ($4.33 trillion), and then Hong Kong ($4.29 trillion). This ranking reflects the dynamic and rapidly changing landscape of global finance.

India’s journey to this position has been marked by several key factors. In 2023, both the Sensex and Nifty indexes recorded significant gains, with the BSE MidCap and SmallCap outperforming, jumping 45.5 percent and 47.5 percent, respectively. Notable gainers included companies like Tata Motors, Bajaj Auto, NTPC, L&T, and Coal India.

The resilience of India’s equity markets, experiencing eight consecutive years of growth, is in stark contrast to the declining trends observed in the Hang Seng index of the Hong Kong Stock Market. This decline in Hong Kong’s market is partly due to the economic downturn in China and pressure on American investors to divest from Chinese companies.

The political landscape in India, particularly the recent victories of the Narendra Modi-led National Democratic Alliance in state elections, has also played a role in boosting investor confidence. With the central government elections approaching in April 2024, the continuity of policies is expected if Modi and the BJP-led NDA secure a third consecutive term.

In comparison, while the U.S. market saw a 25% rise in the S&P 500 in 2023, reflecting a strong job market and eased inflation, China and Hong Kong faced economic challenges. Expectations of a Chinese economic rebound post-pandemic did not fully materialize, leading to a hesitant household spending scenario.

India’s rise to the fourth-largest stock market globally is a testament to its strong economic growth, investor confidence, and robust market performance. Despite some concerns and challenges, the future prospects of the Indian stock market remain optimistic with anticipated global rate cuts in 2024 and key developments like the upcoming budget announcement and the outcome of central government elections.