Money on the markets

A maturing market amid the mayhem

China, India stock markets — brothers in development but not twins


A lot of comparisons are made between China and India but there are myriad differences between the two developing nations — some wide, some not so wide. It would be a huge mistake to believe the two markets and economies are developing along similar lines, or indeed, behaving in the same way, particularly the financial markets.

Chart 1


Take the respective stock markets. The first chart shows the last decade of both India’s benchmark SENSEX stock index and China’s Shanghai Composite. One thing that is immediately evident is that the Composite outperformed India by a long way in the run-up to the very overblown highs. In fact, using 2005 as a starting point it put on a staggering 380 percent while the SENSEX managed 225 percent over the same period.

When the crunch came, the fall was as dramatic as the rally and both markets collapsed with the Composite dropping to a low 73 percent off the peak and the SENSEX 64 percent.

In terms of investment $100 invested in both markets in 2005 before the respective rallies got underway would today be worth $242 (China) and $228 (India) respectively, not a huge amount of difference between the two in terms of overall performance over the period.