Indian stock markets have generated higher returns than Chinese stock markets since 2000, a Deutsche Bank report points out.

The report notes that although China has experienced robust economic growth, the performance of its stock markets has been relatively modest, with real returns averaging +4.0 percent per year since 2000. In contrast, India has become a leader among emerging and developed markets, delivering one of the highest real equity returns of +6.9 percent per year over the same period.

He said that “India has one of the highest real stock returns (+6.9% per annum) among major emerging and developed countries over the period 2000-2024.”

The report also highlights that in 2024, India and the US are among the few markets trading at record high CAPE (cyclically adjusted price-to-earnings) ratios. This indicator, which measures earnings over a 10-year period, smooths out cyclical variations but may not fully capture structural changes in market dynamics.

He said that at the turn of the millennium the CAPE ratio of the US S&P 500 reached unprecedented levels before falling in the early years of the 21st century, it has now recovered to highs that were only briefly surpassed in the last century.

The report also claims that technological dominance, advances in artificial intelligence (AI), and structural changes in earnings expectations justify these high valuations for the United States.

“Bulls would say that technology dominance and AI hopes are giving the U.S. this structural change, and perhaps India’s outlook is so positive that investors are willing to pay for the potential growth” .

He suggests that India’s positive growth prospects and its potential as a key player in global markets also explain why investors are willing to pay a premium.

As we enter a new quarter century (2025-2049), the report adds that India and the United States are starting on a good note but remain expensive compared to markets with more normalized valuations. This positions them as markets to watch, whose growth trajectories are closely linked to investor confidence in their structural strengths and future prospects.