India has taken the spot of Hong Kong as the world's seventh-largest stock market, marking a significant shift in global financial standings.

Citing data from the World Federation of Exchanges, CNBC reported that the National Stock Exchange of India's total market capitalization reached $3.989 trillion by the end of November, slightly overtaking Hong Kong's $3.984 trillion.

(Photo : INDRANIL MUKHERJEE/AFP via Getty Images)
A staff worker walks past a digital display showing India's Finance minister Nirmala Sitharaman presenting the union budget in the Parliament, at Bombay Stock Exchange (BSE) in Mumbai on February 1, 2023.

Economic Prospects of India

This milestone reflects a broader optimism surrounding India's economic prospects. Nifty 50 index of India reached another record high on Tuesday, showcasing a remarkable 16% increase year-to-date and heading for its eighth consecutive year of gains. 

On the other hand, Hong Kong's Hang Seng Index experienced a downturn, dipping 17% year to date. India's stock market has stood out in the Asia-Pacific region this year.

According to CNBC, the increased liquidity, higher domestic participation, and favorable shifts in the global macro environment in the form of falling US Treasury yields have all bolstered the nation's stock markets.

India is also heading into general elections next year, and the ruling Bharatiya Janata Party (BJP) is predicted by analysts to secure a decisive victory, potentially triggering a bull run in the first few months of the year due to expected policy continuity.

HSBC strategists have reportedly identified banking, healthcare, and energy as next year's best-positioned sectors. Sectors like autos, retailers, real estate, and telecoms are also expected to perform well in 2024. The HSBC noted that fast-moving consumer goods, utilities, and chemicals will be categorized as less favorable sectors.

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Hang Seng Index of Hong Kong on Decline

Hong Kong's Hang Seng index is enduring its fourth consecutive year of decline, ranking as the weakest major Asia-Pacific equity market. Moody's recent downgrade of Hong Kong's outlook to negative cited concerns over financial, political, institutional, and economic ties to mainland China. 

In contrast, China has set a 5% growth target for 2023, with third-quarter GDP at 4.9%, fostering optimism for exceeding expectations. Hong Kong anticipated a 3.2% GDP increase in 2023, but challenges persist due to geopolitical tensions and tight financial conditions. 

DBS economists predicted a soft landing for Hong Kong's economy in 2024, with real GDP growth around 2%, driven by a revival of mainland tourism essential for sectors like retail and catering. 

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