Investors are betting on India. Does the market live up to the hype?


As China cools, India’s markets are rising up the agenda for global investors. Recent inflows could be just the start of things to come.

India’s high-flying stock market has been a standout in 2023. It is one of the few global equity markets to set all-time highs this summer, with inflows from foreign investors exceeding USD15 billion year-to-date. 1

Although the market is now trading at nearly a 70% valuation premium to emerging markets, there is good reason to believe the positive momentum will continue. 

India looks set to remain the fastest-growing large economy for the foreseeable future, with the IMF predicting it will become the world’s third-biggest economy by 2028, up from fifth today . Its equity market now ranks as the second biggest among emerging markets and world’s fifth largest by market cap.

Solid growth story
Indian equities benefit from strong underlying fundamentals. The country has made good progress over the past decade in deleveraging corporate balance sheets — in contrast with China’s highly leveraged growth—and cleaning up its banking system. 

While India remains more than 15 years behind China in terms of economic size, it is only five years behind in internet penetration and digital transformation. Over half its population has access to the internet, and digital services are acting as an accelerator to economic development.


Attractive yields

Against this backdrop, India’s onshore debt market, which provides among the highest absolute yields in Asia Pacific,2  is an attractive and increasingly accessible investment opportunity.

Although a spurt in inflation to 7.4% in July from 4.8% in June means a rate cut is not likely until at least 2Q24, Societe Generale strategists and economists believe the current hiking cycle has already peaked. 

Moreover, if ongoing discussions to include Indian government bonds in major global indices come to fruition, this could trigger an additional USD30-40 billion of inflows. This would, in Societe Generale’s calculations, move the yield curve lower (by 40-60 basis points) over the subsequent 2-3 quarters. 

And downside risk to the Indian rupee appears to be capped with expectations that commodity prices are likely to be contained and India’s service exports—and especially exports of digital services — remain resilient. 

Market access

India’s markets are also becoming easier to access for international investors. Government officials and regulators are eager to attract foreign capital from offshore investors, which is seen as key to fuelling economic growth. 

To that end, in addition to easing access to its onshore debt market, India is also moving to bring Offshore Derivative Instruments (ODIs) back home to the International Financial Services Centre at the Gujarat International Finance Tec-City (GIFT City).3 Over time, this should deepen liquidity in equity derivatives and currency futures, making it easier for foreign investors to hedge local securities and foreign exchange exposure.4

These developments, along with India’s solid fundamentals, make its capital markets an attractive investment opportunity for offshore investors.
Societe Generale has been committed to India for more than 35 years, serving some of the leading onshore clients as well as offering a full suite of global markets products — from securities to derivatives — to foreign investors. 

As one of the most active market-making banks in the local FX spot/swaps and rates derivates markets, and a market-maker in Indian government bonds and select quasi-sovereign bonds, Societe Generale is well-positioned to help domestic and international clients pursue India’s rich and enduring opportunities. 


‘This Month in Asia’ is a regular series by Societe Generale’s Global Markets division that brings together regional experts across Research, Equities, and Fixed Income & Currencies to share insights and its capabilities in Asia markets for clients around the world. 

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1. World Economic Outlook, October 2022: Countering the Cost-of-Living Crisis ( 

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