New Delhi: The National Stock Exchange of India (NSE) is set to surpass the Stock Exchange of Hong Kong in market capitalisation, becoming the world’s seventh-largest trading venue, after markets in the US, China, the EU and Japan, Financial Times reported.As of October, NSE’s market cap was $3.7 trillion compared to Hong Kong’s $3.9 trillion, the financial daily reported.According to FT, analysts attribute this growth to investors’ optimism about the economic prospects of India.India’s Nifty 50 index of large companies has risen 8.1% over the past month, hitting record highs this week, while Hong Kong’s Hang Seng index fell 6.7% over the same period.The Hong Kong economy is struggling to recover from the series of shocks experienced between 2019 and 2022. Its $4 trillion stock market is facing liquidity issues. Trading volumes in the financial hub have slumped over the past three years and foreign investors are backing away, the Wall Street Journal reported.Separately, Indian and Chinese stock indices began diverging over the past three years, FT reported. “The China stock indices have generally been downward… whereas the India one has been going one way, which is up,” Abhiram Eleswarapu, head of India equities at BNP Paribas in Hong Kong, told the financial daily.India’s economic and investment landscapeIn an interview to the Economic Times, in November, Mark Mobius of Mobius Capital Partners made a positive assessment of India’s current economic and investment landscape. He said that India is in excellent shape in terms of companies and infrastructure, predicting continued growth in the long run. He added, however, that there might be occasional corrections in the market, as such chances are always present in a bull market.Eleswarapu told FT that strong consumption in India is attracting investors. He pointed to increased spending on property, luxury, and higher-end goods by affluent Indians, as well as growing government capital expenditure on infrastructure.India is indeed witnessing an unprecedented surge in the demand for luxury housing. The average price of luxury housing units in India valued at over Rs 1.5 crore has surged by 24% in 2023 compared to 2018, reported the Financial Express.Business Standard reported how India’s luxury market is turning into a magnet for foreign brands, fuelled by the growing affluence of Indians with higher incomes. Santosh Desai, social commentator and columnist, told the business daily, “The luxury market is inflation proof. Consumers in this segment don’t get impacted by inflationary trends.”Also read: Modi Govt’s Development Model: The Poor Forced to Eat Less, While the Rich Make MerryPolitical stabilityMeanwhile, Narendra Modi’s Bharatiya Janata Party (BJP) won three out of five elections in the recently concluded assembly elections. This has strengthened the party’s bid for a third term in office, in the 2024 Lok Sabha elections.Political stability fosters confidence among investors, and therefore, has significant positive impact on the stock market performance. Conversely, political instability leads to uncertainty, diminishing investor confidence and potentially resulting in adverse effects on stock market returns, along with an increase in overall volatility.Global brokerage Jefferies’ global strategist Chris Wood in October had reportedly cautioned that the Indian equity market could correct as much as 25% if the ruling BJP loses the general election next year.Foreign investment in Indian equitiesGlobal investors looking for alternative to China are pouring money into India, Reuters reported.Investors told Reuters that India is attractive, because it is insulated from China. It’s also emerging as a strong parallel offshore manufacturing hub, and has a healthy consumer base.FT also echoed the same sentiment, noting that with China underperforming, there are limited alternatives for investors focused on emerging equities.Meanwhile, the International Monetary Fund (IMF) has projected that India will grow at 6.3% in both 2023 and 2024.“When you look around the world, there aren’t that many countries where for the next 15-20 years you can be reasonably confident that you will see real GDP growth of at least 6% on a sustainable basis,” Pratik Gupta, chief executive and co-head of institutional equities at Kotak Securities in Mumbai, told FT.Indian companies are continuing to deleverage, a process that has been going on for several years, Gupta told FT. They have been paying down their debt and issuing equity in a trend that accelerated during the pandemic, the report noted.Also read: India’s Economy: Is It Really That Bad?China-plus-one strategyFT reported that India is also a beneficiary of the “China-plus-one” shift of supply chains away from China.It refers to a strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.The financial daily attributed this development to tech giant Apple’s move to make iPhone batteries in India, in an effort to diversify its supply chain.Meanwhile, Tesla has held talks with Modi government officials about the possibility of setting up an Indian factory to make electric cars.