Indian Equity Markets Outpace China’s Since 2000: Deutsche Bank Report
A recent Deutsche Bank report highlights that India’s equity markets have consistently outperformed China’s since 2000. While China’s economy has grown rapidly over the past two decades, its equity markets delivered relatively modest real returns, averaging 4.0% per annum.
India, however, has distinguished itself as a standout performer among both emerging and developed markets, achieving an impressive real equity return of 6.9% annually over the same period. The report underscores this by stating, “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 also points out that as of 2024, India and the United States are among the few markets trading near record-high CAPE (cyclically adjusted price-to-earnings) ratios. This metric, which averages earnings over a 10-year span, helps mitigate short-term market fluctuations but may not fully reflect long-term structural changes.
For the U.S., the report notes that the S&P 500’s CAPE ratio, which peaked at historic levels in the early 2000s, has since reached unprecedented highs again. This surge is partly attributed to America’s technological dominance, advancements in artificial intelligence (AI), and evolving earnings expectations. “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,” the report explains.
India’s favorable economic prospects and its growing role in global markets are seen as key factors driving investor confidence and willingness to pay a premium for its equity markets.
Looking ahead, the report suggests that both India and the U.S. are poised to begin the next quarter-century (2025-2049) on a strong footing. However, their elevated valuations make them more expensive compared to markets with moderate pricing, positioning them as critical markets to watch. Their continued growth will rely heavily on sustained investor confidence and the realization of their structural advantages.
