NEW DELHI - The Indian equities market attained the coveted milestone on Wednesday, well ahead of the Indian GDP reaching $4 trillion, when the entire market capitalisation of all BSE-listed stocks surpassed the Rs 333 lakh crore mark. The Indian stock market is rated fifth in terms of market value among global markets, trailing the US, China, Japan, and Hong Kong.
While the Nifty has gained more than 10% this year, India's m-cap has climbed by over Rs 51 lakh crore in 2023, owing to outperformance of small and midcap stocks as well as a deluge of IPOs on Dalal Street. In May 2021, India will enter the coveted $3 trillion club.
The market cap rises as share prices rise and new listings in the form of IPOs appear. After Fed Governor Christopher Waller hinted at a possible rate cut in the coming months, Nifty bulls got another shot in the arm today, with the index breaking beyond 20,000 for the first time since the September peak.
Foreign institutional investors, who were net sellers of Indian stocks in September and October, have suddenly begun to be net buys. According to NSDL data, net FII buying in November has totaled Rs 2,901 crore. In the fiscal year 2023, FIIs purchased approximately Rs 1 lakh crore in Indian stocks, but domestic institutional investors (DIIs) outperformed dollar money by investing Rs 177.5 lakh crore.
"The biggest concern for foreign investors in India is valuations." "They agree that the fundamental story is great, but the extent to which we have this kind of strong domestic inflows and domestic investors have been buying, that is keeping the markets a little more expensive," said Morgan Stanley's Chetan Ahya.
As India rises in the global economic order, foreign brokerage firm CLSA predicts that India's blistering GDP growth would catapult it to the top three of the world's largest economies, from $3.4 trillion now to larger than Japan's by 2027, $29 trillion by 2047, and $45 trillion by 2052.
By 2027, India is predicted to surpass Japan in nominal GDP in US dollars. "By then, China and the United States will be the only economies larger than India." Looking ahead, we expect the economy to grow from $3.4 trillion now to $29 trillion in 2047 and $45 trillion in 2052. If big bang reforms unleash efficiencies, India's GDP might exceed the US by 2052, according to CLSA. As India's GDP continues to rise, the market cap is likely to follow suit, if not outpace it. If the market cap to GDP ratio is 100%, the m-cap will also double as the GDP doubles.
In terms of the Nifty and Sensex, Dalal Street bulls expect the indices to double in the next five years. Mark Mobius and Chris Wood, two major India bulls in the international market, have predicted that the Sensex will reach 1 lakh in just five years.
"Right now, India is in a different cycle where we are seeing corporate upgrades." India Inc's overall earnings have climbed 32% so far in the July-September quarter, compared to our projection of 26%. India is on fire. "The index can double in the next five years and quadruple in the next ten," market guru Raamdeo Agrawal recently stated.
India Improves
Some big global brokerages have recently upgraded Indian shares to overweight positions. According to JP Morgan, investors should take any near-term dip as an opportunity to purchase and capitalize on good historical seasonality to Lok Sabha elections.
CLSA upgraded India, increasing the country's portfolio allocation to 20% above the MSCI benchmark. Nomura also upgraded the Indian equity market to overweight, stating that values could continue high. Goldman Sachs produced a report in June stating that it is overweight India due to the medium-term development potential and advised foreign investors to increase their exposure to this rising economy.
