Indian stock markets have delivered stronger returns compared to China’s stock markets since 2000, a Deutsche Bank report highlighted

The report noted that while China has experienced robust economic growth, its stock market performance has been relatively modest, with real returns averaging +4.0 percent per year since 2000. In contrast, India has emerged as a leader among both emerging and developed markets, offering one of the highest real equity returns of +6.9 percent per annum over the same period.

It stated that “India has one of the highest real equity returns (+6.9% p.a.) of the major EM and DM countries during QC 2000-2024”

The report also highlighted that as of 2024, India and the US are among the few markets trading near record high CAPE (cyclically adjusted price-to-earnings) ratios. This metric, which measures earnings over a 10-year period, smooths out cyclical variations but may not fully account for structural changes in market dynamics.

It stated that at the turn of the millennium, the US S&P 500’s CAPE ratio reached unprecedented levels before declining in the early years of the 2000s, now climbing back to heights only briefly exceeded in the last century.

The report also argues that technological dominance, advances in artificial intelligence (AI), and structural changes in earnings expectations drive these elevated valuations for the U.S.

It said “The bulls would argue that tech dominance and AI hopes offer the US the structural change, and perhaps India’s outlook is so positive that investors are prepared to pay for the potential growth”.

It suggested that India’s positive growth prospects and its potential as a key player in global markets also explain why investors are willing to pay a premium.

Heading into the new quarter century (2025-2049), the report added that India and the US are starting at a high level but remain expensive compared to markets with more normalized valuations. This positions them as markets to watch, with their growth trajectories closely linked to investor confidence in their structural strengths and future prospects.