India among top 3 in market cap to rally most
2 min read . Updated: 10 Jul 2020, 07:36 AM IST
PremiumMarket gains during April-June period were the best since the September quarter, 2009
MUMBAI : Since the lows of March following the global outbreak of covid-19, India’s aggregate market value has risen 45%, making it one of the three countries to see the biggest gains from that level. In terms of gains in market capitalization, India is now only behind Germany, which has gained 51.62%, and Canada’s 49.36%, and is at the bottom of top 10 nations by market cap. Leaders US and China, saw an expansion of 44.48% and 35%, respectively, in their market cap, from March lows.
Despite the covid-stricken macro scenario, gains in Indian markets during the April-June period were the best since the September quarter of 2009.
However, this rally, largely driven by the optimism around post-lockdown economic recovery and a gush of liquidity, especially from foreign institutional investors, has not lifted India’s 10th ranking in the league table of market cap.
In the last three months, the rally in local equities was in sync with the movement of other top 10 nations, where unprecedented levels of fiscal and monetary stimulus fuelled markets. Data from Bloomberg showed that India’s contribution to the $84.36 trillion world market is still low at 2.26%, while China’s share has risen the most. Indian contribution to the global market cap is also lower than the 10-year average of 2.48%.
Among the world’s top 10 stock markets, India is the only country with a market cap below $2 trillion, with an aggregate of $1.90 trillion at current levels. India’s contribution to the world market cap was highest at 3.43% on 4 October, 2010.
According to analysts, a weak rupee is a factor behind India’s low market cap. “Besides, the Indian market rally is driven by a handful of stocks; thus the total market cap looks narrow. India’s economic condition is still poor and corporate earnings may worsen further, hence many stocks have not gained much, limiting the upside of market growth," said an analyst who did not want to be named.
The rupee is the worst performing currency among Asian peers. It has weakened 4.86% against the dollar so far this year, while the dollar is one of the strongest currencies. Major headwinds such as India’s border tension with China, weak domestic equities and sustained foreign fund outflows kept the rupee under pressure.
In rupee terms, the aggregate market cap touched ₹142.55 trillion, up 42% from the low in March, but is down nearly 10% so far in 2020. In January, India’s market cap was at ₹152.94 trillion.
