At 10.9%, Indian stock market delivered higher returns than US, China, others in last 10 years: Report

The Indian stock market has outperformed major markets in the world on a three-year, five-year and 10-year basis. The Nifty large cap index has delivered a 10.9 per cent annualized return over the past 10 years, compared to 6 per cent of the US index and 2.7 per cent of China’s market, according to a report by ASK Investment Managers.

In the last five years, Indian markets delivered 18.8 per cent annualized return, compared to 6.9 per cent of US, 12.1 per cent of Japan index, and 7.6 per cent of US index. Additionally, in the last three years, the annualized return of Indian markets stood at 6.1 per cent, higher than US, UK indices, and only slightly lower than 6.3 per cent mark of Indonesia market.

‘’Despite challenges, India is strongly poised to build on its strong structural and macroeconomic fundamentals. The market performance will never be linear, but the foundation for long-term economic growth is being built,” said Sumit Jain, Deputy CIO, ASK Investment Managers.

The current calendar year has been strong for the markets in general, according to the report. While the large cap index (Nifty) is up 6 per cent CYTD, midcap index (BSE Midcap Index) and small cap index (BSE Small Cap Index) are up 23 per cent and 27 per cent respectively.

However, India has not been an outlier. Other countries including Germany, France, Mexico, Japan have delivered higher returns compared to India during the same time frame. Notably, where India differs is on long period returns. On a 3/5/10 years basis India’s performance has been superior compared to other markets.

Earlier this year, DSP Asset Managers in its Netra June 2023 report titled ‘Early Signals Through Charts’, revealed that over the last 123 years, the Indian stock market has delivered a real return of 6.6 per cent, which is higher than the returns delivered by US and China markets as well as the world equity markets.

This means that India has compounded investors’ wealth at 6.6 per cent CAGR or compound annual growth rate, higher than 6.4 per cent CAGR by the United States and 3.3 per cent by China since the year 1900. The CAGR shows real compounding which means it is adjusted for inflation and takes care of currency depreciation that happens over the years because of inflation, according to DSP.

Key factors behind the resilient performance by Indian stock market:

-India’s long period performance is a function of sound and stable domestic macro-economic scenario, along with high real growth rate. India remains the fastest growing major economy of the world and expected to be the third largest economy by 2027.

-India’s real gross domestic product (GDP) growth rate was over 7 per cent in 2022-23 and expected to remain over 6 per cent in 2023-24. India’s growth rates are more structural and over period it has managed to reduce the impact of external global macro vagaries on domestic macro.

-Another factor which is playing an important part in India’s growth is strong demographics. With a relatively young and growing population, India is poised to take a competitive advantage as it would reach the highest working age population that is aspirational, young and with increasing income levels, by 2030.

The first quarter results point to continued strong corporate performance. Nifty posted a profit-after-tax (PAT) growth of over 30 per cent year-on-year (YoY). The oil marketing companies (OMCs) contributed to the major portion of this high PAT growth due to having a benign base of Q1FY23. Nifty (Ex OMCs) with ~19% growth in PAT, also posted strong performance.

-The growth in PAT can be attributed to the fall in input costs aiding in margin expansion across sectors. While the aggregate sales for the top 500 businesses grew 4 per cent, margin expansion driven by benign commodity prices led to superior profit growth during the quarter.

-Sectoral growth was driven by automobiles, oil and gas, insurance, banks and capital goods. Slowdown was more pronounced in globally linked sectors like chemicals, IT, metals, followed by low ticket consumption have been the major pain areas.