India’s market cap at record high, Sensex hits 40,000 for first time since Feb

In dollar terms, value of all shares traded, or aggregate market capitalization of India is currently at $2.11 trillion. India is at the bottom position of the top 10 countries by market cap while India’s share in world market cap is at 2.3%, below its historical average of 2.5%.

However, even as aggregate market cap has made new highs, benchmark indices are around 4% away from their all-time highs hit in January this year, though they are gradually inching closer.

The Sensex hit the 40,000-mark on Thursday, the first time since February.

The 30-share index Sensex ended at 40,182.67, gaining 303.72 points or 0.76%. The Nifty closed at 11,834.60, gaining 95.75 points or 0.82%. A good start to September quarter result led by the IT sector bellwether Tata Consultancy Services Ltd and expectations of another government stimulus ahead of the festive season have also contributed to the widespread optimism among investors, said analysts.

According to Prasanna Pathak, head-equity and fund manager, Taurus Mutual Fund, surge in global liquidity, balance-sheet expansion by central banks, and stimulus measures by governments have contributed to the overall rally in Indian equities for the past few months.

“Since the markets tend to discount the future, it can be argued that markets are expecting a quick earnings revival, speedy approvals for vaccines, and strong global liquidity. So, it will be interesting to see how things pan out in the next 3-6 months. The markets are ignoring many negative news and risks recently," he said.

The rally in equities in the recent months has been broad-based and supported by non-index stocks. From March lows, BSE Midcap advanced 53%, BSE SmallCap increased 71% while BSE 500 rose 57%. Both BSE Sensex and Nifty are up over 55% each in this period.

Share of both BSE Midcap and BSE Smallcap in the overall market capitalization have increased since January high. At current levels, the BSE MidCap index contributes 13.70% to India’s total market cap. In contrast, contribution of the Sensex to India’s total market cap has grown to 49.06% at current levels while BSE Smallcap contribution has increased to 14.25%.

“The broad-basing of markets after almost three years of polarization augurs well as recovery in the underlying economy takes shape. Mid and small-cap indices have once again outperformed the Nifty in September," said analysts at Motilal Oswal Financial Services Ltd.

They said that management commentaries suggest temporary halt in premiumization trends across categories, continued cost rationalization initiatives, deferment of capex spends and cash-conservation seem to be the key trends playing out. “Sectors where the commentary was relatively more optimistic were pharmaceuticals, technology, chemicals and consumer staples," said analysts.