India joins the coveted $4 trillion club

The market capitalization as evidenced by the stocks listed on the BSE and the NSE surpassed the $4 trillion mark on 29 November. India is now the fifth country after the United States, China, Japan, and Hong Kong to achieve this milestone. The overall market capitalization on the BSE touched Rs 333.29 lakh crore ($4 trillion in US dollar terms) while that on the NSE touched 334.72 lakh crore. This market cap of $4 trillion is well ahead of India’s GDP that currently stands at $3.62 trillion.

India’s market cap has risen nearly 19.5% so far this calendar year, even as China’s has seen a 5% decline and vs the US market cap growth of 17%. The move from $3 trillion to the $4 trillion mark took 30 months ie from May 2021 to November 2023. Previously, BSE-listed firms hit the $1-trillion market cap milestone in May 2007 and it took over 10 years to double. The market cap surpassed $2 trillion in July 2017.

Source: BSE. Date: 4 December 2023. The above graph is used to explain the concept and is for illustration purpose only and should not used for development or implementation of an investment strategy. Past performance may or may not be sustained in future.

2023 has been a good year for Indian markets. India has been in limelight for all the right reasons - an improving macroeconomic backdrop, tightly managed interest rates to tame inflation and an improved earnings outlook. India became a preferred destination for foreign portfolio investors who poured in Rs 104,972 cr or $12.8 billion in the 11 months. Meanwhile, DIIs too have invested in excess of Rs 1,68,000 cr or $20.3 billion. From being a consumption- oriented economy, India has been moving towards a consumption and investment led economy. The markets have reacted positively and rightly to this potential strength of the country. Year to end of November, the Nifty 50 gained 11.2% while the BSE Sensex rose 10.1%. The Nifty Midcap 100 posted 36.2% gains and the Nifty Smallcap 100 saw 45.6% gains.

Commenting on India’s achievement on becoming a part of the $4 trillion club, Ashish Gupta, CIO, Axis Mutual Fund said, “India’s entry to this club is a reflection of the strides the economy has made over the past few years and it is now among the top 5 globally. India is also now the fastest growing large economy and at this pace will contribute to 10% of global growth this year. The country is rewriting its growth story supported by an improved earnings outlook, de-leveraged corporate balance sheets and robust inflows from FPIs and DIIs. In our view, all the right ingredients are in place to set the growth momentum further."

Post hitting the $4 trillion mark, benchmark indices scaled further lifetime highs given the spectacular rally on 4 December following the ruling party’s resounding win in three of the five states. The Sensex 30 ended at 68,865.1, the NIFTY 50 at 20,686.8 and the Nifty Bank at 46,431.4. Separately, the recently released second quarter GDP growth numbers at 7.6% suggested continued domestic momentum, with growth being well ahead of consensus and driven by manufacturing and construction growth. On the expenditure front, growth was led byinvestments due to front loading of capital expenditure by the state and central governments. Private consumption remains a concern due to lower rural demand. On the other hand, government has been supporting growth through capex. Adding to more strength in the economy, the PMI data suggested that manufacturing continued to expand. The gauge of manufacturing remained above 50 for the 29th month in a row. In the next few years, India’s share in manufacturing could likely improve further given the government’s strong focus to make India the factory of the world.

Disclaimer

Source of Data: Axis MF Research, Bloomberg, BSE, NSE. Date: 4 December 2023

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