BSE capitalisation reaches $4 trillion as GDP is expected to catch up in the coming fiscal

BSE‘s market capitalisation reached $4 trillion last week, ahead of state election results, a testimony to positive investor sentiment that transcends politics. Subsequent data points, GDP growth of 7.6%, which was much above consensus estimates, and BJP’s sweeping election victories in the heartland, have turbocharged markets further. At Wednesday’s closing, market cap was $4.19 trillion. So, more than $100 billion has been added in four days. The markets soared on Monday, post Sunday’s results, though rises on subsequent days have been more muted.

The $4 trillion milestone has happened earlier for market cap than for GDP. The latter is expected to hit that number in the coming fiscal year. India is No. 5 in the global market cap rankings, the same position as GDP. Indian bourses are, in fact, within striking distance of the Hong Kong Stock Exchange, which is at $4.7 trillion. A pre-2024 election bull run, now widely predicted, can get us there. The top three, US, China and Japan, are at considerably higher levels. As India’s GDP rises, would the market cap rise in tandem? Though there is no direct correlation, there could be significant wealth effects that provide tailwinds to the economy. Retail investors own 10% of equity, about $400 billion, and their share has been rising. That should help consumption, which accounts for close to 60% of GDP. The faith of retail investors has prevented the market from crashing during post-Covid periods when FPIs have pulled out money. Promoters’ wealth is around $2 trillion, and they should, thus, feel more enthused about investing, leading to an uptick in the much-awaited private sector capex. Equity seems to be available in some abundance.

Close to 200 companies have launched IPOs this year, compared to 144 in 2022. Another 80 are waiting in the wings. India’s structural advantages are increasingly getting noticed by investors of all stripes. These include strengthening India’s position in the ‘plus 1’ part of ‘India plus 1’ strategy of MNCs, political stability and improving infrastructure.


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