It was a record-breaking year. With inflows pouring into the Indian stocks from foreign and domestic investors, large Indian companies had a dream run, clocking huge gains in market value in 2019.
India’s largest conglomerate Reliance Industries Ltd (RIL) added a whopping ₹2.49 trillion to its market capitalization during the year. This was by far the highest addition in market value by a single entity in a given year.
The previous high in market capitalization was back in 2017, when Reliance Industries had topped the list adding ₹2.3 trillion to its market capitalization.
In 2019, Tata Consultancy Services stock added about ₹1 trillion to its market capitalization.
In fact, RIL added nearly ₹4 trillion to its shareholders’ wealth in the last two years alone.
Sentiments in the Indian stock market took a turn for the better after the government announced a corporate tax cut for Indian companies. Stocks ended 2019, adding about ₹12 trillion in market capitalization.
“The performance of the large-cap indices was helped by a strong performance of a few large-cap stocks and earnings upgrades for most stocks post the corporate tax cut announcement on 20 September 2019. Incidentally, the Nifty-50 Index was at similar levels on 31 December 2018 (10,863) and 19 September 2019 (10,705), which would imply that the market’s entire return for CY2019 has come after September 19, 2019," said Kotak Institutional Securities Ltd in a note to clients.
By contrast, in 2018, India’s total market capitalization fell by ₹6.28 trillion, as investors sold a large number of stocks, particularly mid- and small-caps, taking its toll on shareholders’ wealth.
However, the sentiment in 2019 had not been as buoyant as it was in 2017, when Indian stock markets added a whopping ₹46 trillion in market cap.
Still, the Indian markets owe much of the gains this year to low-interest rates across the globe, which drove investors to equities. Globally, the MSCI world index ended at a record high, as global stock market capitalization zoomed past $50 trillion, up 25.2%. However, the bulk of India’s stock market gains is coming from a fewer number of companies. In 2019, the top 13 market cap gainers accounted for all gains. Some of the other top gainers include HDFC Bank, which gained ₹1.19 trillion, while ICICI Bank Ltd ( ₹1.17 trillion), Bharti Airtel Ltd ( ₹1.09 trillion), Bajaj Finance Ltd ( ₹1.02 trillion) and TCS ( ₹1 trillion), added substantially to their investors’ kitty.
“The strong performance of banks, diversified financials and insurance reflects (1) re-rating of multiples of the beaten-down banks on peaking of NPLs, decline in slippages and loan-loss provisions and continued strong performance of the ‘retail’ banks," noted Kotak’s report.
(With inputs from Clifford Alvares)