India is world’s No 2 by market cap: Equities add over 73,00,000 Crore

India has secured its position as the world’s fifth-largest equity market, witnessing a remarkable increase of over $1 trillion in market capitalization within the last six months. This surge has driven frontline indices to unprecedented highs and spurred active participation among investors.

Since the start of 2024, the combined market capitalization of listed companies on Indian stock exchanges has surged by 24.5% to reach $5.23 trillion. In contrast, China, the second-largest market, saw its market capitalization shrink by $1.06 trillion during the same period. Japan’s market remained relatively stable, while Hong Kong added $428 billion.

The recent surge in India’s market valuation is attributed not only to soaring stock prices but also to new listings on Dalal Street. This growth marks one of the largest increases in market capitalization since 2007, underscoring India’s growing prominence as an investment destination.

Recent data highlights a notable shift in investor sentiment favoring India over China, with substantial inflows originating from US investors. Large-cap funds have particularly benefited, while mid- and small-cap segments await similar resurgence.

In recent weeks, the USA led with inflows totaling $700 million, followed by significant investments from Ireland ($447 million) and Japan ($433 million). Korea also contributed $130 million to these inflows.

Conversely, China experienced substantial outflows amounting to $2.3 billion during the same period, highlighting India’s increasing attractiveness to global investors. Japan witnessed outflows of $753 million, with significant withdrawals from Taiwan and Brazil further emphasizing India’s rising appeal.

Foreign Portfolio Investors (FPIs), after being net sellers in April and May, reversed their stance, becoming net buyers. They purchased stocks worth nearly $1.4 billion in the last five trading sessions up to June 14, 2024. This turnaround contrasts sharply with net selling of $1.04 billion in April and outflows of $3.06 billion in May, indicating renewed confidence in India’s market outlook.

Among the top companies by market capitalization, Reliance Industries leads with over $245.3 billion, followed by Tata Consultancy Services (TCS) at $167 billion. India now boasts five companies with market capitalizations exceeding $100 billion, including HDFC Bank, Bharti Airtel, and ICICI Bank. Together, these firms contribute 14.5% to the total market capitalization.

While Indian stocks command premium valuations compared to other emerging markets, concerns linger among experts about broader market valuations. While Nifty50 valuations appear reasonable, broader market segments remain relatively expensive, influenced by factors like capitalization, quality, and risk.

This surge in India’s stock market underscores its growing significance in global finance, attracting considerable attention from international investors amid ongoing economic shifts.