Behind the long -term trend of the Indian stock market is a trending growth with a continuous profitability of Indian listed companies and expected, which is closely related to the long -term stable growth of the Indian economy.

The Indian stock market shocked for a long time in the 1990s, and the Nifty50 Index fluctuated between 800 ~ 1400 points from 1992 to 2003.Since then, although the Nifty50 Index has experienced a bull and bear market, the "small decline and rising" has shown a trend of shocks as a whole.The annualized return rate is about 13%(see Figure 1).This article attempts to sort out the medium- and long -term factors of the Indian stock market through the perspective of economic growth, macro policies, stock market systems, and foreign capital inflows.

Strong economic growth is the root cause

GDP is traffic, wealth is the stock, and the growth of high economic growth is usually accompanied by local asset appreciation.For example, since 2009, the long -term bulls of US stocks have accompanied the longest economic boom in the United States after World War II (except for the short -term recession due to the impact of the epidemic in early 2020), and the Indian housing market in the period of high economic growth is also repeatedly adjusted, it is easy to rise.India's stock market prosperity over the past two decades is also a product of high economic growth.

Statistics of the International Monetary Fund (IMF) show that the average year -on -year growth rate of the actual GDP in India from 2000 to 2022 was 6.5%, which was higher than the average growth rate of 3.6%in the same period.5.3%of the average growth rate.According to the statistics of the Indian Bureau of Statistics, the average annual increase of India's nominal GDP (Indian rupees) from 2003 to 2023, which is similar to the average annual increase of the Indian Nifty50 Index in the same period.

From an industrial perspective, the proportion of India's tertiary industries has gradually increased from 47.8%to 59.1%from 2004 to 2019. Although the epidemic fell slightly after the epidemic, it still accounted for 58.6%in 2023.From the perspective of the expenditure law, India's economic growth is mainly composed of domestic private consumption. Since 1997, the proportion of actual GDP has been 55%to 60%.Due to the long -term trade deficit, the contribution of net exports to the actual GDP of India has also been negative for a long time.It can be seen that India's economic growth is mainly driven by the consumption of the service industry and domestic residents, which is obviously different from the models of the East Asian economy that mainly rely on manufacturing and exporting economy.Surat Stock

Population dividends and scientific and technological progress constitute the basis of India's long -term economic growth.India has a huge population base and a large number of young people. The continuous improvement of the level of educational levels has provided a high cost -effective labor force for India's economic development.At the same time, as a developed economy with a low degree of modernization, the application of mature industrial technological achievements is enough to quickly improve the production efficiency of many industries in India, thereby promoting the rapid growth of economic output.

The profitability of the Indian listed company changes with the growth rate of India's economic growth, and the former directly affects the trend of the Indian stock market.From the perspective of historical overall profit changes, from 2004 to 2023, the average net profit of the India's Nifty50 Index was 14.6%year -on -year, which was faster than the average net profit per share of Emerging Market Index in the same period of 12.5%.speed.From the perspective of the rhythm of profit changes, India's Nifty50 Index's net profit per share in the year -on -year growth rate roughly shows the characteristics of a cycle of three to five years (the growth rate is gradually rising from low, and then touched and fell), and the stock index changes have roughly followed the stock index changes.Changes in the profit cycle (see Figure 2).Guoabong Investment

Active fiscal policy and flexible monetary policy ironing economic fluctuations

India has long -term expansion fiscal policies with high intensity, and in recent years, strength has further increased.According to IMF statistics, the Indian fiscal deficit rate (general government net borrowing/borrowing accounts for GDP) was an average of 8.2%between 2000 and 2022, while the global emerging market and development of economies in the worldThe fiscal deficit rate is more than double the emerging economy.Since 2000, except from 2006 to 2007 (the average deficit rate of two -year deficit is 5.2%) and 2017 to 2018 (the average deficit rate of 6.3%) is low, the deficit rate of the remaining years is maintained at7.0%or more high levels.In 2022, India's fiscal deficit rate was 9.2%. Although it fell in 2020 and 2021 after the impact of the epidemic, it was still significantly higher than the average level of 6.8%from the average of 6.8%from the epidemic before the epidemic (see Figure 3).

From the perspective of fiscal expenditure, from 1994 to 2023, India's development expenditure (including medical insurance and other social benefits, economic services, agriculture, hydropower, infrastructure development and other projects) accounted for an average of 56%of the total fiscal expenditure, and non -development expenditures (Interest expenditure, administrative and government personnel expenditure, national defense and other projects) accounted for less than 50%.Since 2020, the proportion of developmental expenditures has risen to more than 60%.From the perspective of developmental expenditures, social welfare, agricultural development, and power and industrial development of medical insurance and education are among them.Another noteworthy phenomenon is that data from the Indian government budget official website show that the growth rate of capital expenditure (including related financial subsidies) promoted by the government has continued to increase in recent years, and it is expected to reach about 15 trillion rubles from 2024 ~ 2025.This is equivalent to about 5%of India's nominal GDP in 2023.The Indian government's long -term support for residents' social welfare helps to encourage residents to increase consumption, and support for agriculture, industrial industries, and infrastructure will help enhance economic competitiveness and development potential.The increase in consumption capacity and willingness of residents and the improvement of economic development momentum will gradually transform into the continuous strong growth of the profit of the company's listed companies' corporate corporate companies, thereby promoting a good return of Indian stock indexes.

The main goal of the Central Bank of India's monetary policy is to maintain stability of prices and take into account the goal of economic growth.Since 2016, the Bank of India has officially regarded the 4%CPI growth rate as an inflation target and pursued to control the inflation at 2%to 6%.From 2014 to 2017, the growth rate of inflation in India fell from a high level, and once fell below the lower limit of 2%of the policy target range.To this end, the Indian central bank adopted a loose monetary policy to continuously reduce the policy interest rates, and gradually reduced the benchmark interest rate from 8%to 6%, which promoted economic growth and inflation levels.After the outbreak of the epidemic in 2020, the Central Bank of India quickly lowered the policy interest rate from 5.15%to 4%, which caused the Indian economy to rebound strongly after the epidemic, but also caused inflation from January 2022 to February 2023, which continued to be higher than higher than in February 2023 than in February 2023.The upper limit of 6%policy target interval.Therefore, the Bank of India has tightening currency in the second quarter of 2022, and the benchmark interest rate rose from 4%to 6.5%in about one year.Under the influence of strong tightening, India's economic growth fell from a high level, and the growth rate of inflation fell below 6%againBangalore Investment. In January 2024, it was 5.1%(see Figure 4).On the whole, the Indian central bank flexibly adjusted the monetary policy, avoiding the ups and downs of inflation, and created a stable macroeconomic environment for the Indian stock market.

In addition, changes in broad liquidity have also affected the Indian stock market.Historical data shows that the year -on -year changes in the India's Nifty50 Index are about one month after the year -on -year growth rate of India M2 (see Figure 5).On the one hand, changes in liquidity on the one hand, on the one hand, have a certain leading role in the changes in real economic activities and corporate profits, and on the other hand, it also affects the supply of incremental funds in the capital market.The Bank of India regulates broad liquidity by adjusting the interest rate corridor, conducting public market operations and adjusting financial regulatory policies. The overall abundant general liquidity also supports the excellent performance of the Indian stock market as a whole.

The Indian stock market pays more attention to investor protection and investment and financing balance

From the perspective of regulatory agencies, the Indian Securities Exchange Commission responsible for the supervision and management of Indian securities has adopted a variety of measures to protect the rights and interests of investors (especially small and medium investors).For example, increase the convenience and fairness of new shares to purchase, increase supervision of brokers, and increase the upper limit of compensation for investors to investors.From the perspective of the stock exchange, India's major stock exchanges also adopt various measures to protect investors' rights and interests, and roughly realized the "advance and retreat" of listed companies.Especially at the level of mandatory delisting, India's stock exchange has high flexibility and freedom of discipline, and protects the rights of public investors with the withdrawal mechanism.Measures are implemented to directors of listed companies and individuals.

On the other hand, India also pays more attention to the balance of investment and financing in the stock market.In recent years, the total amount of dividends (cash dividends) of listed companies is higher than the amount of fundraising (listing+issuance+priority stock sale).In the whole year of 2023, the amount of funds raised by Indian listed companies was about 31.6 billion US dollars, while the scale of the cash dividend of listed companies was about 52.5 billion US dollars, which was 1.66 times the amount of fundraising.From 2014 to 2023, except for the amount of fundraising in 2017, 2020, and 2021, the amount of dividends were significantly higher than the amount of dividend, and the rest of the year was significantly higher (see Figure 6).In the past ten years, Indian listed companies raised a total of approximately US $ 248.2 billion, and the cash dividend was about 351.4 billion US dollars, which was about 1.42 times the former.From the perspective of the relative scale of fundraising, the scale of fundraising in India's listed company has also maintained at 1%to 2%in recent years, showing that the "blood" effect of fundraising for the market is not significant.

Foreign capital continuous net inflow helps the Indian stock market performanceAhmedabad Wealth Management

In order to attract foreign capital to enter the Indian stock market, the Indian government and related institutions have carried out a series of policy adjustments and reforms in financial markets in recent years.For example, the listing rules of the Indian exchanges have continued to improve in recent years to enhance the disclosure of the financial information of listed companies; the Indian government has continuously relaxed the restrictions on foreign securities investment, including relaxing the upper limit of foreign investment and industry restrictions, and foreign exchange transaction control.These measures have achieved certain results, and India's weight in the MSCI Global Standard (emerging market) index has increased from 6.4%in 2013 to 18.2%(as of February 2024 review report).

Under the joint attraction of factors such as strong economic growth, excellent stock market performance, and continuous advancement of financial market reform, foreign capital has continued to buy Indian stocks for a long time.From 2000 to 2023, except for the net sales in 2008, 2011, 2018, and 2022, the rest of the year were net foreign net purchase, of which about $ 21.4 billion in net purchase in 2023Ranking fourth.As of the end of January 2024, foreign capital (FPI) held a position of approximately 16%of Indian stock market value.In fact, since 2007, the trend changes in foreign investment in Indian stocks have been synchronized or even slightly ahead of the year -on -year changes in the Indian stock index, which shows that the impact of foreign capital on the Indian stock market cannot be ignored (see Figure 7).

Indian stock market performance long -term excellent revelation

It can be seen that behind the long -term trend of the Indian stock market, it is a trending growth of the continuous profitability of Indian listed companies and expected, which is closely related to the long -term stable growth of the Indian economy.At the same time, the Indian government has continued to carry out a strong reform in the financial market in recent years. It focuses on investors' protection and investment and financing balance, steadily promoting the opening of the financial market to the outside world, and continuously attracting foreign investment.The entry of foreign capital has pushed up the stock price, while bringing a wealth effect to Indian investors in India, and also promoted the further target international standards for the governance and financial market supervision of Indian local corporate.Conversely, the long -term excellent performance of the Indian stock market also brought a generous return to international investors, and enhanced its confidence in its long -term allocation of Indian stocks.

Drawing on India's experience, for the active Indian capital market, the author believes that on the one hand, we must adhere to the problem -oriented and result -oriented, adhere to the combination of lengths, and the symptoms., Boost confidence.On the other hand, while further promoting the opening of the financial market system in the international high standards, we will improve the basic system and the guarantee of the Indian stock market, improve the quality of listed companies from the source, pay more attention to protecting investors' interests, promote the stock market investment and financing functionsFurther balance.

(The author is the global chief economist in BOC Securities)