Indian markets hit historic $4 trn market cap milestone for the first time

Indian markets on Wednesday hit the historic $4 trillion market cap milestone for the first time. Currently, there are only three countries in the $4-trillion-plus mcap club--US, China and Japan. Hong Kong too, is part of the club. However, a large contribution is on account of companies belonging elsewhere, mainly China.

Market value of all BSE-listed companies currently is at a record high of Rs 333 trillion, translating into $4 trillion.

With a market cap of almost $48 trillion US is by-far the world's largest equity market. Followed by China ($9.7 trillion) and Japan ($6 trillion).

According to Bloomberg data, India’s market cap has risen nearly 15 per cent so far this calendar year, even as China’s has seen a 5 per cent erosion in its market cap. The US is the only market in the top-10 market cap club which has grown at a faster clip than India at 17 per cent. The combined world market cap has grown 10 per cent this year to $106 trillion.

The mcap gains this year are propelled by gains in the broader market mid- and small-cap stocks. Stocks outside the top-100 now contribute 40 per cent to the country’s market cap, up from 35 per cent during the start of this financial year.

Since April 1, India’s mcap has risen 27 per cent. Meanwhile, the mcap of top 100 companies has growth 17 per cent to Rs 195 trillion, while those outside the top 100 have seen their market value surge 46 per cent to Rs 133 trillion.

“India's correlation of returns with global equities continues to decline and is lower than in history.
That said, India is a large stock market in terms of capitalisation in a global context and cannot completely deviate from global equity market trends. Softer global markets could cap absolute returns whereas a strong global bull market could coincide with relative underperformance for low-beta market like India,” says Ridham Desai, MD & Head of Research, Morgan Stanley India.

Analysts say achieving the $4 trillion mcap milestone will burnish India’s image as the go-to market in the Asia and Emerging Market (EM) basket.

India’s strong earnings, macro stability and domestic flows make it a standout market, say analysts. In recent weeks, about half a dozen foreign brokerages, that includes Goldman Sachs, JPMorgan, Morgan Stanley and CLSA, have recommended higher allocation to India in the EM and Asia Pacific (APAC) basket even as valuations remain pricey vis-à-vis its peers.

“India has the best structural growth prospects in the region. We believe GDP growth is likely to stay robust at 6.3 per cent year-on-year in 2024. While the external macro backdrop of high for longer rates, persistent dollar strength, lower China growth and greater geopolitical uncertainty, could potentially lead to elevated market volatility in the region, India is relatively less sensitive to these external shocks,” says Sunil Koul, APAC Equity Strategist, Goldman Sachs. Earlier this month, the US-based brokerage upgraded its stance on the Indian markets to ‘overweight’.