Bull Run: India’s Market Cap Hits $3 trillion
On Monday, 31st May 2021, the Indian stock market reached an all-time high market capitalization of $3 trillion piping European powerhouse Germany and joining the UK, France and Canada in a $3 trillion m-cap club. India crossed $1 trillion m-cap in 2007 and it took 14 years to reach the $3 trillion m-cap club.
Ten of the most valued firms witnessed a combined growth which is valued at $1 TRILLION, making it the biggest hit. The largest market cap is Reliance Industries Limited which is valued at Rs.1,396,943.17 crore. Among the other big players contributing to the Indian economy are: TCS, HDFC BANK, INFOSYS, HINDUSTAN UNILEVER, BAJAJ FINANCE, ICICI BANK, ADANI GREEN ENERGY, HDFC and ADANI TRANSMISSION.
Indian stock market performed exceptionally ignoring all the economic setbacks caused due to the pandemic and stood on the first position as the best performing major market throughout the previous year overtaking all the major countries such as the USA, China, UK and more.
The market cap is still low relative to the economy, which has been measured by the Buffett indicator. A Buffett indicator is measured in terms of market capitalization with a country’s GDP. The value derived from this indicator shows India’s M Cap/GDP ratio at 102% which is a high for the nation because India has rarely reached 100%. The last time India crossed 100% was in 2008 when the ratio was valued at 103%. However, this is still much lower in comparison to the ratios of developed economies like: Hong Kong, Taiwan, Saudi Arabia, Switzerland, USA, Canada, South Korea, Japan, and UK.
As per Morgan Stanley’s prediction, the Indian market has rallied sharply but there’s a lot more on the way. It is being predicted that in the bull run scenario, Sensex can be seen at 61,000 points by December 2021 and in such a case, the market could reach the $3.5 trillion m-cap. Listing of companies such as LIC, Zomato and more could add up $200 billion more and in such a scenario, India could overtake Canada & France among the Top 10 in market capitalization global list ending up on 6th position from 8th position at the moment.
Along with some benefits, some risks are also associated. The risks possible in this surge scenario are valuations looking stretched and are pricing in the economic recovery and there is a significant amount of risk in case of economic recovery delays while US interest rates still are a concern for global equities.
The question that arises here is how long the investors’ confidence will remain? Until the economy doesn’t show a real recovery the risk will exist.
