A recent report released by Deutsche Bank revealed that Indian equity markets have outperformed China’s equity markets since 2000.
The report noted that, despite China’s rapid economic growth, its equity market performance has been comparatively average, with real returns averaging just 4.0 percent per annum.
India, on the other hand, has emerged as a leader among both emerging and developed markets, providing one of the highest real equity returns of over 6.9 percent per annum during the same period.
The report stated, “India has one of the highest real equity returns of 6.9 percent among the main EM and DM countries from 2000 to 2024.”
The report further emphasized that India and the US are among the few markets trading near record-high CAPE ratios as of 2024. The CAPE (cyclically adjusted price-to-earnings) metric, which calculates earnings over a 10-year period, smooths out cyclical fluctuations but may not fully capture structural changes in market dynamics.
The report stated that the US S&P 500’s CAPE ratio, at the dawn of the millennium, reached unprecedented levels before falling in the early 2000s, yet it has since soared to levels not seen before and was only briefly exceeded in the previous century.
The report also explained that the US’s tech dominance, advancements in artificial intelligence (AI), and structural shifts in earnings expectations help justify these elevated valuations.
It said, “The bulls would argue that tech dominance and AI hopes offer the US that structural shift, and perhaps India’s outlook is so positive that investors are prepared to pay up for the potential growth.”
It suggested that India’s favorable growth outlook and its potential as a key player in global markets help explain why investors are willing to pay a premium.
Furthermore, the report stated that the two countries are set to start the next quarter of the century (2025-2049) on a strong note, but they remain expensive compared 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.