An analyst with market-research firm Capital Economics has analysed data from more than 200 major stock markets and found that India’s equity markets are not growing.
In a note to clients, the company said that the data suggests that India is still relatively small compared to major emerging markets, including China and South Korea.
This is in contrast to China and other emerging markets where stock markets are rising quickly.
“This suggests that growth in India is slowing down rather than accelerating, and suggests that there is still time to invest in stocks in the near term,” Capital Economics said.
It added that the slowdown is a consequence of an oversupply of capital in India.
In addition, the lack of access to finance, which is one of the key drivers of India’s slow growth, also means that India has not seen enough capital inflows into the economy.
The analysts also highlighted that the lack the access to capital can also be a factor in the sluggish growth in the Indian stock market.
The lack of capital also means the Indian equity market has not had time to recover from its steep decline after the global financial crisis in 2008, said Mr. Shreya Shrivastava, head of emerging markets and sovereign debt at Capital Economics.
It is important to keep in mind that Indian equities are not as liquid as those in other emerging market countries, like China or South Korea, he added.
While there are some emerging market stocks that are trading at a premium in India, most are not trading at that level.
“We do not think that India will be able to grow at the same rate as China, and in the longer term it will be hard to catch up with China’s pace of growth,” Mr. Choudhury said.
The market-analysts said that although India is not the world’s biggest stock market, it is the world with the largest number of small and medium-sized businesses, as well as the largest proportion of the economy, which accounts for around 30% of the market capitalisation.
The slowdown has not only affected the growth of companies, but also affected the way that businesses invest, according to Mr. Dhawan.
“There is a lot of uncertainty around the Indian economy, and it is likely that a lot more uncertainty will be created by the coming years as we get a clearer picture of the future,” he said.
The market analysts said that India should be cautious and not take risks with the market, which may mean that it does not grow as fast as other emerging economies.
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