India leads m-cap gains in top markets
The benchmark Sensex surged 78% so far this fiscal year—the best performer among the top 10 nations
PremiumMUMBAI : 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.
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