A recent report released by Deutsche Bank revealed that Indian stock markets have outperformed Chinese stock markets since 2000.
The report notes that despite China’s rapid economic growth, the performance of its stock market has been relatively average, with real returns averaging just 4.0% per year.
India, on the other hand, has become a leader among emerging and developed markets, offering one of the highest real stock returns of over 6.9% per year during the same period.
The report said: “India has one of the highest real stock returns of 6.9% among major emerging and developed countries between 2000 and 2024.”
The report further highlights that India and the United States are among the few markets trading at CAPE ratios near record highs in 2024. The CAPE (cyclically adjusted price-to-earnings) measure, which calculates earnings on A 10-year period smooths out cyclical fluctuations, but may not fully reflect structural changes in market dynamics.
The report states that the CAPE ratio of the US S&P 500, at the dawn of the millennium, reached unprecedented levels before falling in the early 2000s, but has since climbed to levels never seen before and was only briefly surpassed in the previous century.
The report also explains that U.S. technological dominance, advances in artificial intelligence (AI), and structural changes in earnings expectations help justify these high valuations.
“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 favorable growth prospects and its potential as a key player in global markets partly explain why investors are willing to pay a premium.
Furthermore, the report states that both countries are expected to enter the next quarter century (2025-2049) on a high note, but remain expensive relative to markets with more moderate valuations. These speculations make them key markets to watch, as their growth trajectories depend on investor confidence in their structural strengths and future potential.