As foreign investors buy shares to bet on the growth of the world’s most populous country, Indian stocks have outperformed those of their British and French counterparts to rank fourth globally.

According to information from QUICK FactSet, India’s market capitalisation reached $3.4 trillion on Friday, increasing 13% since March 31.

The South Asian nation has now surpassed France and Britain as a result. According to FactSet data, India now represents 3.3% of the total market capitalization of the main global markets, placing it fourth behind the United States, China, and Japan.

Yosuke Mimaki, a product specialist at Sumitomo Mitsui DS Asset Management, noted that India is one of the few markets where investors may buy equities based on growth prospects. “The bias towards U.S. tech stock is being reassessed, and with the pace of China’s economic recovery in doubt,” he added.

Despite profit taking pushing the index to a lower closing on Monday, India’s benchmark Sensex index hit records on Friday and Monday. On Friday, the blue-chip Nifty 50 index also set a new high.

The Sensex and the Nifty 50 have increased since the end of March by 7% and 8%, respectively, as of Monday. Among the major markets in the Asia-Pacific region, this growth stands out.

China’s slower than anticipated economic recovery is weighing on equities in other parts of Asia. Indonesia’s benchmark is down by 2% since the end of March while peers in Thailand and Hong Kong are off 3% and 2%, respectively. Japan’s Nikkei Stock Average is an exception with a 20% rally.

India is relatively less reliant on overseas demand, which in turn has raised hopes for growth amid mounting economic concerns in the U.S. and China.

Private consumption accounts for roughly 60% of India’s gross domestic product. India’s middle class is expanding due to rising incomes, driving consumer spending.

Corporate earnings have been robust in annual results released through the end of May in a further boost to the stock market.

India’s top automaker, Maruti Suzuki, reported record-breaking revenue and net profit for the fiscal year that ended in March. The impact of the shortfall of semiconductors was overshadowed by the spike in demand. Since March 31, the company’s share price has increased by 16%.

On the strength of good earnings, Tata Motors’ stock value increased by more than 30% during the same time period. Sales of luxury vehicles have increased in India as a result of rising consumer income.

Compact cars dominated the market in the past, but sport utility vehicles are now significant sellers, according to Eastspring Investments’ Yasutomo Mentani.

Mentani predicts the same phenomena will take place in everyday products to create “a wave of high-end consumption.”

The financial sector is expected to benefit from the demand for automobiles and home loans. Shares for State Bank of India have risen 9% since the end of March.

Multinationals are eyeing India both as a major consumption center and as a destination for reworking supply chains. India is fast becoming a home for companies looking to shift capacity away from China.

In April, the first official Apple Store opened in India. Hon Hai Precision Industry, the Apple supplier known as Foxconn, is moving to expand its manufacturing presence in India.

Such direct investments help India attract more capital. International investors began buying Indian stocks on a net basis in March, India’s National Securities Depository reports. Net purchases grew to 438.3 billion rupees ($5.35 billion) in May, or roughly four times that of April. Net stock purchases in June stood at 164 billion rupees as of Friday.

Investors appear hesitant to pick up Chinese equities given the economic and geopolitical risks, and are turning to Indian equities for safety.

According to Venugopal Manghat, chief investment officer of Indian equities at HSBC Asset Management, government support for the industrial and infrastructure sectors is also encouraging foreign investors to allocate capital to India.

The settling of commodity prices has slowed the inflationary tendency. Following a similar decision in April, the Reserve Bank of India, the country’s central bank, maintained policy rates this month. The market anticipates a rate drop from the RBI early in 2019.

A few observers raise the possibility of negative hazards. According to Sonal Varma, chief economist for India and Asia outside Japan at Nomura Holdings, the effects of rate hikes will be felt in India’s discretionary expenditure, which might cause the economy to experience a cyclical downturn.

(WITH INPUT SOURCE)