The viral news of India turning into a $4 trillion economy might have turned out to be fake but the emerging market superstar needs just one blockbuster day for its equity market capitalisation to touch the magical figure.
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The total market capitalisation of all BSE-listed stocks at the end of the trading session on Thursday touched an all-time high figure of Rs 328.33 lakh crore, which translates to $3.94 trillion.
To hit the landmark of $4 trillion, India now needs to add just about Rs 5 lakh crore to its market cap (keeping the USD rate steady at 83.3). The feat can be achieved with steady growth in the next few days or in just one lucky trading session when bulls find a new trigger to take full control of the narrative.
While Nifty is up about 9% so far in the calendar year, India’s m-cap has increased by about Rs 46 lakh crore in 2023 led by the outperformance of small and midcap stocks as well as a flood of IPOs on Dalal Street. India had joined the coveted $3 trillion club in May 2021.
In the global order, the Indian stock market is ranked fifth in terms of market value, behind the US ($47 trillion), China ($9.7 trillion), Japan ($5.9 trillion) and Hong Kong ($4.8 trillion).
At the macro level, India is currently estimated to be the fifth-largest economy with a GDP of $3.7 trillion, behind the USA, China, Germany and Japan.
“India is now pegged to become a $7 trillion economy by 2030 according to various estimates. The market cap will also match the GDP. As and when the GDP doubles, the m-cap will also double assuming that the market cap to GDP ratio is 100%,” said Sunny Agrawal of SBI Securities.
The market cap increases due to share prices going up as well as new listings in the form of IPOs.
“From a global investor’s perspective, India is an under-allocated market with the USA enjoying about 45% share in world market cap while India is less than 4%. In the longer term, not only will the flows increase – both from foreign as well as domestic investors – but new IPOs will also add to India’s market cap,” Agrawal said.
As far as Nifty and Sensex are concerned, Dalal Street bulls see the headline indices doubling in the next 5 years. Both Mark Mobius and Chris Wood, two big India bulls from the overseas market, have predicted that the Sensex will hit the 1 lakh mark in just 5 years.
“India is in a different cycle right now where we are seeing corporate upgrades. The aggregate earnings of India Inc, thus far in the July to September quarter, have increased 32% as against our expectation of 26%. India is on a roll. The index can double in the next five years from here on, and surge 4x in 10 years,” market guru Raamdeo Agrawal had said recently.
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In the near term, investors are anxiously awaiting the outcome of the state Assembly elections which is seen as the semi-final round ahead of the Lok Sabha polls next year. Threats from the rise in US bond yields, crude oil prices and dollar index have now subsided and the pace of FII selling has also slowed down, making the $4 trillion m-cap milestone within kissing distance.
However, as far as the GDP is concerned, the $4 trillion mark may be achievable only in FY25.
