India’s total market capitalization has slipped significantly this year, even though the benchmark equity indices remained fairly firm. Bloomberg data showed aggregate market capitalization of India was down 2.91% in dollar terms from what it was in the beginning of the year. During the same period, the BSE Sensex gained 1.04% in rupee terms, but fell 1.13% in dollar terms.

India is the only one, among the top 10 countries by market cap, which saw a drop in 2019. Canada has gained the most, up 10.58%. With a current market cap of $2.02 trillion, India ranks ninth in the league table of the world’s biggest stock markets. In December, India had climbed to the seventh position briefly, but was subsequently toppled by Canada and Germany at seventh and eight positions, respectively, this year. Gaining 4.32% this year, Germany’s current market cap stands at $2.04 trillion, while Canada is at $2.06 trillion.

In rupee terms, aggregate market cap of all listed companies on Indian bourses has fallen 1.17% from 144.48 trillion in start of 2019 to 142.79 trillion.

According to analysts, non-participation of the broader markets in the rally is the real reason for the aggregate market capitalization not reflecting the true picture.

Atul Bhole, vice president and fund manager, DSP Investment Managers, said: “I think there is lot of disparity in the stock performance. Only a handful of stocks are driving the index performance. There is a lack of broad-based participation in the markets. Similarly, mid- and small-cap stocks are also under pressure, and that could have depressed the overall market cap. So, it is very narrow rally at index."

Share of both BSE MidCap and BSE SmallCap in the overall market capitalization has decreased, while that of the Sensex has grown from January 2018 till now. At current levels, the BSE MidCap index contributes 13.61% to India’s total market cap, down from 14.16% in January 2018. In contrast, contribution of the Sensex to India’s total market cap has grown from 39.7% in January last year to 45.6% at current levels. The BSE MidCap and SmallCap indices lost 3.32% and 2.55%, respectively, in 2019. Last year, BSE MidCap was down 13.38%, while the BSE SmallCap index slipped 23.53%.

Vipul Sharma/Mint
Vipul Sharma/Mint


The Indian rupee, meanwhile, is still the worst performing currency among Asian peers. After weakening 8.46% last year, the rupee is already down 2.08% in 2019. Currency fluctuations, stretched valuations and volatility in the markets are already keeping foreign institutional investors (FIIs) away from Indian equities. In 2019, FIIs have been net sellers of Indian shares worth $372.62 million, while domestic institutional investors were net buyers of equities worth 2,278.96 crore.

“It is not that FIIs are pulling out money from India alone, but from across emerging markets. Secondly, US interest rates were rising or are expected to rise, while Indian markets were looking overtly expensive, which are reasons for foreign investors selling in India. Currently, valuations have eased off a bit, which is again not broad based and India is still expensive compared to peers. FIIs are getting better bargains in their own markets," Bhole added.

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