Inside India newsletter: India’s economic growth is smashing forecasts, but its biggest stocks aren’t feeling the love
India's strong economic growth has surprised every quarter for the last year, but the performance of its key stock benchmarks has been deeply disappointing.
TL;DR
- India's economy is growing at 7.8%, surpassing expectations, while major economies like the U.S., China, and Japan are slowing down.
- Despite economic strength, India's key stock benchmarks, like the Nifty 50, have been among the worst-performing globally this year.
- Large-cap indexes are heavily weighted towards financial services and IT, sectors facing revenue and margin pressures.
- Mid- and small-cap stocks are showing stronger performance, driven by sectors like manufacturing, fintech, and consumer tech, which are experiencing increased economic activity.
- The opportunity size for mid- and small-cap companies is growing as profit pools shift from large-caps, and these companies are more exposed to emerging sectors.
- India's success in electronic manufacturing, like becoming the second-largest mobile manufacturer, is not captured by top indexes.
- Mid-cap companies are showing significantly higher earnings growth compared to Nifty 50 companies and are increasing their capital expenditure.