India leads m-cap gains in top markets

Indian stocks gained the most among the world’s top 10 nations by market value this fiscal, underscoring the strength of the rally that remained unshaken by covid-induced turmoil and economic uncertainties.

India’s aggregate market capitalization soared 88% in dollar terms this fiscal year, showed data from Bloomberg.

This is the sharpest increase in aggregate market capitalization since FY11.

Last fiscal year, India’s market capitalization plunged 31% as the nationwide lockdown wrecked investor sentiment.

Despite the sharp rise, India remained at the eighth position among countries with a market capitalization of $2.8 trillion.

The US, with a market capitalization of $45.83 trillion, and China at $10.57 trillion saw an aggregate market capitalization expansion of 67% and 52%, respectively, from April 2020 so far.

Canada ($2.89 trillion) saw a growth of 78%, while Saudi Arabia ($2.53 trillion) made the lowest gain of 28% among the top 10 markets.

Analysts said a broad-based rally in equities and a heavy flow of foreign liquidity either through foreign institutional investors (FIIs) or as foreign direct investment (FDI) accelerated the expansion of Indian markets this year.

“Unlike the pre-covid period, this year, the rally in Indian markets has been quite broad-based. The smaller stocks have also given strong returns in the year, which has raked up India’s total market cap,” said Vinod Karki, equity-strategist, ICICI Securities. “Other factors which supported the rally were the robust earnings recovery, reforms and fiscal push by the government to boost the economy, most of which are infrastructure-led, which will have a multiplier effect for three to four years.”

The benchmark Sensex surged 78% so far this fiscal year—the best performer among the top 10 nations.

In comparison, the Dow Jones (US) gained 50%, the Shanghai Composite (China) rose 35%, and Hong Kong’s Hang Seng gained 22% so far since April 2020.

The strong performance has lifted India’s contribution to global market capitalization to 2.58% in March from 2.1% last April. This is marginally above its historical average of 2.4%.

This fiscal so far, the BSE Midcap and the BSE Smallcap indices jumped 93% and 120%, respectively. The shares of both these indices in the overall market capitalization also rose, while that of the Sensex fell.

Currently, the BSE Midcap and the Smallcap indices contribute 14.8% and 15.2%, respectively, to India’s total market cap, up from 14.4% and 14.5% in January.

Meanwhile, the contribution of Sensex to market capitalization grew from 48.78% in mid-March last year to 48.91% at the end of January but fell to 46.74% in mid-March 2021.

“The mcap-to-GDP (gross domestic product) ratio has been volatile. It declined to 56% (FY20 GDP) in March 2020 from 79% in FY19 and has rebounded to 104% currently (FY21 GDP) above its long-term average of 78% and highest levels since after the great financial crisis. The lowest ratio in the past two decades was 42% in FY04. The ratio hit a peak of 149% in December 2007 during the 2003-08 bull run,” said Motilal Oswal Financial Services in a note earlier this month.