This rally has made it one of the best performing markets in Asia, while India has been a relative underperformer, mostly due to subdued earnings growth. Before getting into the reasons as to what led to India’s performance or lack of it and vice-versa, it should be noted that India’s stock market is about 10 times bigger than that of the neighbouring country.
Why Pakistan’s stock market is rallying?
According to Bloomberg, Pakistan’s retail investors have heavily turned to equities over other investments with no returns from property prices and the deposit rates plummeting. “We are now seeing a liquidity-led rally,” an analyst was quoted as saying in the report.
The data backs that. Nearly 36,000 new trading accounts in the country were opened in the September quarter, compared to 23,600 new registrations just three months back
The country’s economy also seems to be getting slightly on track after years of turbulence. Two ratings agencies S&P Global Ratings and Fitch Ratings upgraded the country’s ratings this year, citing improved fiscal management and reform momentum.Also Read: Tech euphoria returns? Nvidia’s blowout earnings ignite global tech stocks, D-St braces for surge
Why did Indian markets underperform?
After world beating shows for the past few years, sentiments in the Indian markets have moderate this year with a return of 9% YTD. That too most of the heavy lifting was done in the second half of the year. The lack of pure play artificial intelligence trade coupled with higher valuations and slowing earnings growth led to mass selling by foreign investors. The outflows have crossed nearly Rs 1.5 lakh crore.
“The persistent FII selling trend over the past year can largely be attributed to two primary factors: superior performance of developed markets and currency concerns,” said Shrikant Chouhan, Head Equity Research at Kotak Securities.
Indian markets now better placed
After a relatively subdued year, most analysts agree that Indian markets are better placed currently. Add to that the earnings cycle is likely to improve in the coming quarters.
Morgan Stanley has set the Sensex bull case target at 107,000 by December 2026. It says Indian equities could regain strength in 2026 after their weakest relative performance in three decades. “The policy changes have improved the outlook for nominal growth, which should help earnings move out of the slowdown seen over the past year. It believes valuations are reasonable enough to support better performance.”
Meanwhile, HSBC sees India as a market for key diversification play, away from AI trade, which are showing first signs of cracking.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
