India’s BSE hits record $3 trillion market cap

India’s stock exchange, BSE, on Monday said that the market capitalization of all the listed companies on its platform hit the $3 trillion mark intraday for the first time in history.

“Market capitalisation of equities of listed companies on @bseindia reached $ 3 trillion intraday for the first time ever. A great milestone on a long journey. Congratulations to all 69 million plus registered investors, 1400+ brokers,69,000+ MF distributors and 4700+ companies," Ashish Chauhan, chief executive officer of BSE said in a tweet.

The only other countries that have a stock market capitalisation of more than $3 trillion are the US, China, Hong Kong, Japan, the UK, France, and Canada.

Analysts said BSE’s record market capitalisation comes at a time when foreign institutional investors (FIIs) have been exiting Indian equities. Since 23 March, FIIs have sold Indian shares worth nearly $2.48 billion. However, domestic institutional investors, including mutual funds and insurance companies, continue to invest, thanks to abundant liquidity and optimism about mid- and small-cap stocks.

According to analysts, the Nifty and the Sensex have been consolidating since mid-January, driving liquidity into midcap and small-cap segments. Also, with most large-caps fairly valued, value investors started moving down the market cap pyramid. From their 52-week lows, BSE MidCap has advanced 92 per cent, BSE Smallcap 121 per cent and BSE 500 75 per cent.

Investors are heading more for mid-cap stocks as growing risk appetite, and cheaper valuations of these companies compared to large-cap peers have revived their popularity, said Siddharth Khemka, head of retail research, Motilal Oswal Financial Services.

Khemka said sentiments have turned buoyant as domestic Covid cases fell below the 300,000 mark for the fifth day in a row since mid-April, helped by the extended lockdowns by major states.

“Hopes have accelerated that soon restrictions/curbs would be eased once cases decline further. Visibility on the economic recovery front improved as industrial activities largely continued even during the lockdown, and now, with restrictions likely to ease, consumer demand is expected to make a comeback. Thus, investors are heading more for mid-cap stocks as growing risk appetite, and cheaper valuations of these companies compared to large-cap peers have revived their popularity," said Khemka.

Analysts said the March quarter performance of good mid-cap and small-cap companies were also way ahead of Street estimates despite rising input costs, mostly due to higher revenues and various cost control measures.

They expect earnings to support the market valuation further while keeping an eye on covid-19 cases and vaccination progress.

“India’s valuation premium with respect to MSCI emerging markets has remained stable at 40-45 per cent over the last four months, indicating that the rally has been a global one. The headline valuations for the Nifty Midcap 100 suggest that we are in an acceptable zone that can act as a platform for the broader markets to do better from hereon. Midcaps in a growing market with market leadership and low leverage can be equally attractive investment options as any large-cap," Tata Mutual Fund said.

— issacjohn@khaleejtimes.com