Well before India's GDP reached $4 trillion, the Indian equity market accomplished a significant feat on Wednesday, surpassing the coveted milestone with a total market capitalization of BSE-listed stocks exceeding the Rs 333 lakh crore mark.
Globally, the Indian stock market now holds the fifth position in terms of market value, trailing behind the US, China, Japan, and Hong Kong. In the current calendar year, the Nifty has seen a growth of over 10%, while India's market capitalization has surged by approximately Rs 51 lakh crore in 2023. This upswing is attributed to the performance of small and midcap stocks, along with a surge in IPOs on Dalal Street.
India had entered the esteemed $3 trillion club in May 2021. The increase in market capitalization is fueled by both rising share prices and the addition of new listings through IPOs. Following Federal Reserve Governor Christopher Waller's suggestion of a possible rate cut in the coming months, Nifty witnessed a significant boost, crossing the 20,000 mark for the first time since the September peak.
After a selling spree by foreign institutional investors (FIIs) in September and October, they have now shifted to being net buyers, with net FII buying standing at Rs 2,901 crore in November so far, as per NSDL data. In the calendar year 2023, FIIs have invested around Rs 1 lakh crore in Indian stocks, while domestic institutional investors (DIIs) have surpassed this by injecting Rs 177.5 lakh crore.
Foreign investors express concern over India's valuations despite acknowledging the positive fundamental story. Chetan Ahya of Morgan Stanley notes that strong domestic inflows contribute to keeping the markets relatively expensive. As India ascends in the global economic hierarchy, foreign broking firm CLSA anticipates India's robust GDP growth propelling it to become one of the top three global economies.
The forecast predicts India's GDP to reach $29 trillion by 2047 and $45 trillion by 2052, surpassing Japan in nominal GDP by 2027, with only China and the US remaining larger. As India's GDP continues its upward trajectory, the market capitalization is expected to mirror this growth. Analysts project that the market cap will double when the GDP doubles, assuming a market cap to GDP ratio of 100%. Looking at the Nifty and Sensex, bullish sentiments on Dalal Street anticipate these headline indices to double in the next five years.
Influential figures such as Mark Mobius and Chris Wood predict the Sensex reaching the 1 lakh mark within this timeframe. In the current economic cycle, marked by corporate upgrades, India is experiencing a surge. Aggregate earnings of India Inc. in the July to September quarter have surpassed expectations, increasing by 32%. Market expert Raamdeo Agrawal believes that the index could double in the next five years and surge fourfold in the next decade.
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