Indian stock market's share in global m-cap rises to 3.6% in October after hitting a two-year low: Report

The sharp rebound in the Indian stock market during October, which marked its best monthly gain since April, helped its share in global market capitalization improve after dropping to a 24-month low.

After remaining under pressure for a considerable period, the Nifty 50 staged a strong comeback in October, touching the 26,000 level before ending the month 4.5% higher—the best MoM returns in the last seven months. Notably, amid extreme volatility, the index fluctuated around 1,498 points before closing 1,111 points higher.

The rebound also supported the improvement in India’s market cap share, which rose to 3.6%, according to a report released by domestic brokerage firm Motilal Oswal. In September, the share had hit a two-year low of 3.5%.

India is among the top 10 contributors to global market capitalization, and at its peak, the share has reached 4.6%. Though it improved on a MoM basis, it remained flat on a yearly basis.

During the last 12 months, global market capitalization rose 19.3% to $23.9 trillion. While all major global markets witnessed gains, India’s market cap remained unchanged as valuation concerns and weak earnings continued to constrain momentum.

The report shows that Korea recorded the highest increase in market cap, rising 52% to $2.6 trillion, followed by Taiwan at 23% to $3.2 trillion, China at 27% to $13 trillion, and Germany at 19% to $3 trillion.

Meanwhile, Brazil saw its market cap rise 7% to $0.8 trillion. In terms of the highest share in global market capitalization, the US retained the top position with a contribution of 48.4% at $71.4 trillion in October, followed by China at 13%.

Japan and Hong Kong rank next with 5.2% and 4.9%, respectively. With a market capitalization of $5.3 trillion, India stood in the fifth position, the report showed.

Indian stock market showing signs of recovery

While Indian equities have shown lackluster performance over the past year, the brokerage noted that the market now appears to be in a healthier state compared to last year. Indian equities are expected to mean-revert and post an uptick going forward.

The brokerage highlights reasonable valuations, with the Nifty trading at 21.4x, slightly above its LPA of 20.8x, and expects that any signs of earnings growth pickup could further support valuation expansion.

It also believes that a series of government measures will help reset the trajectory of corporate earnings as domestic reforms continue. Furthermore, any resolution of the tariff stalemate would serve as an important external catalyst.

"Our model portfolio is more aligned towards domestic names, driven by expectations of a domestic economic rebound. While SMIDs trade at expensive valuations, we continue to focus on this segment, selectively picking high-conviction SMID names in our portfolio," said the brokerage.

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