India's Robust Equity Returns Outshine China's Since 2000

A Deutsche Bank report highlights India's leading position in global equity markets, delivering +6.9% annual returns since 2000, surpassing China's +4%. With record-high CAPE ratios, both India and the U.S. are valued for their tech growth, AI advancements, and investor confidence in future prospects.

Indian equity markets have markedly outperformed their Chinese counterparts in delivering returns since 2000, according to a recent Deutsche Bank report. While China has seen vigorous economic growth, its stock market posted modest real returns of an average +4.0% annually, in stark contrast to India's +6.9% per annum.

As noted in the report, India ranks among the top markets globally, offering high real equity returns among both emerging and developed nations in the timeframe up to 2024. Notably, both India and the U.S. are trading near record-high CAPE (Cyclically Adjusted Price-to-Earnings) ratios, a metric that accounts for earnings over a decade.

In terms of valuations, the U.S. has experienced significant fluctuations, notably seeing the S&P 500's CAPE ratio reach all-time highs before a decline early in the 21st century. It has now rebounded significantly, driven by growth in technology sectors and advancements in artificial intelligence. Similarly, India's positive growth outlook is attracting investors despite high valuations. The report suggests that investors are willing to pay premiums for India's potential as a major player in global markets.

Looking ahead to the next quarter-century, both India and the U.S. start on a strong footing, though expensive, compared to markets with traditional valuations. Their trajectory remains entwined with investor confidence in their structural and growth potential, which will be crucial in watching their future growth paths.

(With inputs from agencies.)