2 reasons why stock market is witnessing a tougher Diwali than expected
Indian indices have fallen 7-8% in the last month, wherein US indices have inched up 1-2% and the rest of world, including China, being stable. This could be due to two reasons a) The Chinese stimulus package announced in September to revise their real estate and stock markets b) Weaker than expected earnings results for India Inc. in Q2F2025 so far. FII outflow at over US$ 10 billion has been unprecedented, probably moving into China. The India Earnings growth story has been delayed but not derailed and it is just a matter of time.
The themes we would like to be invested in the current environment are largely domestic facing sectors like the capex-related power sector against global, especially since we are having strong economic tailwinds and global headwinds for slowdown in growth. In the global facing sector, we would like to be invested in India’s outsourcing stories like pharmaceuticals.
(Source: Bloomberg)
Why are investors looking at China today?
The Chinese market, which had been a darling for investors from 1990 till 2007 the GFC crisis, has got derated since, due to its real estate issues and bloated balance sheets. From a peak of ~160% Market Cap. (MC) to GDP the Chinese indices now stand at ~60% MC to GDP a staggering 60% discount to its peak, in line with its average. As against it, India is currently trading at 140% MC to GDP its peak and 130% premium on a P/E basis to China as against 100%. MSCI has been constantly raising their weightage in India from 7% 10 years ago to almost 20% today; as
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