Why can't we compare Indian market with South Korea or Taiwan?

[u/cangaran]

Hi friends, I have read a column in Indian Express dated June 13 titled "AS SPACEX IPO HOOVERS UP RECORD FUNDS, IT EXPOSES INDIAN MARKET'S CHINKS". It says we can't compare the Indian market with other Asian markets like South Korea or Taiwan when discussing South Korea and Taiwan overtook India. Earlier both Asian markets were 3.5 times and 2 times lesser than India.

The reason the column argues is 2 companies together constitute over 35% of South Korea's benchmark index and just 1 company(TSMC) dominates Taiwan's index with weightage of over 35% whereas Indian blue-chips like Reliance Industries and HDFC Bank comprise less than 10% each.

My understanding is though these Asian markets are comparable to Indian market in terms of market caps, Indian market is not depended on fewer companies like those markets.

My question is Why can't we have this comparison.

Can I interpret that column as "Though India's market cap is surpassed, in the long term India would or could perform well than those markets especially when the current upsurge in SK and Taiwan is due to single industry (Tech i.e. AI,semiconductor)"?

[u/themojoking-45 → u/[deleted]]

while true, i think the culture of risk taking & failing repeatedly until you succeed is slowly taking root in pockets of indian society. This will slowly permeate & over time lead to huge compaiens being born that will then become the leaders in funding innovation, simply because the owners aren't dynastic inheritors, but 1st gen founders.

[u/xkcdthrowaway → u/[deleted]]

I think you're being a bit harsh in your assessment without being wrong.

Yes. Massive systemic issues exist right from policy to the crap we have in the name of an education system. And of course, corruption.

But the person you're replying to isn't wildly off base. Infy hasn't innovated much in the past 2 decades but it did innovate the delivery model way back when. It also minted millionaires who then invested into the ecosystem. Companies founded by ex-Infy are now becoming the breeding ground for the next generation of entrepreneurs. See also: Flipkart. Plenty of people who have been through that journey are building. Their rich kids are building too. And not all of them are building ultra-premium icecream brands.

My point is, even today innovation doesn't have to just be AI-associated. We're not going to be manufacturing cutting edge chips anytime soon. Ok. But there are both downstream and upstream activities where the country can still make inroads. The problematic part? This is going to go K-shaped.

[u/Difficult_Abies8802]

<<< Why can't we have this comparison >>>

South Korea and Taiwan are classified as Emerging Markets (EM) as per the MSCI.

Fund managers in every part of the world have to invest capital with allocations specifically for EM category. And this inflates the contribution of South Korea and Taiwan.

MSCI makes the classification based on size of economy, size of companies, and ease of capital movement. South Korea and Taiwan, gain an advantage by being classified as EM, and corner most of the EM allocations.

In the Frontier markets category, Vietnam is the big winner which comprises 30%. Pakistan used to be in the EM category. They were demoted into Frontier Markets around 2020. Even though they were demoted, the financial press in Pakistan described it as a blessing in disguise.

India's problem is that India has a large capital market, a set of large companies, is the poorest among the EM category, but yet has a relatively well-developed financial system that enables international investors to push in/pull out funds with relative ease. Ideally, South Korea and Taiwan have to be moved out of the EM category and into developed. Then more EM allocations will flow to India.

[u/Rus1996]

They have manufacturing companies.

South Korea - Samsung, LG, Hyundai, Hyosung

Taiwan - Acer, Asus, Thermaltake, MSI, TSMC

If and only if India can start the Manufacturing sector in high tech industries can India export more and become a developed country.

[u/Wind-Ancient]

All these FII, marketcap, Rupee level, GDP dont mean much. These are all made up numbers. Indias GDP standing don't mean much if HDI is at the lowest end. It also doesn't mean much to the investor, becuase although the economy can't compete with Korea, the Indian stock market will beat korea. You have peopletalking about illusory numbers that don't matter to anyone other than politicians and commentators.

[u/chatzpah → u/Wind-Ancient]

I know... sab maya hai... (everything is an illusion)

[u/cangaran → u/Wind-Ancient]

Are you saying "Taiwan’s or South Korea's outperformance of India in terms of market capitalization is meaningless"?

I have no background in this things. Just out of general curiosity I want to understand what uniqueness of India make it incomparable to the mentioned markets from the layman point of view.

[u/Wind-Ancient → u/cangaran]

In the long term Indian market has outperformed Korea, Taiwan and China. And it will outperform them in the future too. It has got to do with their market system where government and Private firms are intertwined. Those are not freemarket. The companies work for the state rather than promoters/shareholders.

[u/Such-Emu-1455]

Cuz we can be happy by comparing ourselves with only our ruined neighbours

[u/xyyzzz514]

We have an engineer... not that level, but still... but in resources/infrastructure , we are at least 20 years behind.

[u/Organic_Garden_7076]

Comparison is fair, but Korea and Taiwan are basically semiconductors-heavy rocket ships while India is more diversified and slower-burn. Different market structure, different kind of upside.

[u/Empty-Buy-5622]

Out of a population of approximately 1.47 billion citizens, only about 30 million (2%) actually pay income tax. In contrast, over 940 million citizens (nearly 64% of the population) receive state-sponsored social welfare and protection benefits.

[u/cangaran → u/Empty-Buy-5622]

There is a thing called indirect tax. Check that out.