India's equity market adds over $1 trillion in 6 months, beats all other markets except the US
India—the fifth largest equity market in the world—has added more than $1 trillion to its market capitalisation over the last six months after a relentless rally in stocks propelled frontline indices to fresh record highs. Since the beginning of 2024, the combined market capitalisation of companies listed on Indian bourses surged by 24.5% to $5.23 trillion. That compares with the $1.06 trillion erosion witnessed by the second-largest market—China—during the same period. While the Japanese market remained almost flat in the last six months, the fourth largest market Hong Kong added just $428 billion, according to Bloomberg data.
In absolute terms, the Indian market has never seen an increase of this magnitude except in 2007. During the year 2007, the market capitalsiation of the country had swelled by $1 trillion to $1.81 trillion. However, other than an increase in stock prices, listing new companies on Dalal Street also weighed on the overall market valuation.
On Wednesday, both the Sensex and Nifty50 climbed to their record highs, aided by a stellar rally in Reliance Industries. The country’s largest company contributed nearly two-thirds to the Nifty’s gains, which ended the session 147.50 points higher at 23,868.80 points.
While Reliance Industries tops the market cap league table with $245.3 billion, the second-largest company, Tata Consultancy Services (TCS) commands a market valuation of $167 billion. India currently has five companies that boast a market capitalisation of at least $100 billion. Other companies that form part of the elite group include HDFC Bank, Bharti Airtel and ICICI Bank. These five companies together contribute 14.5% to the total market capitalsiation, which stood at $5.23 trillion as of Wednesday’s close.
However, experts have been cautious on the valuation of Indian stocks, which have been commanding premium valuations over other emerging markets. Even though the valuations of Nifty50 are a lot more palatable, the broader market valuations are even more expensive, with the expensiveness being inversely proportional to capitalisation, quality and risk.
With the current valuations of Indian stocks already higher compared to its peers, the market's future direction will now depend heavily on governance and earnings growth, observed Nilesh Shah, Managing Director of Kotak Mahindra AMC. “Margin expansion story is over for the Indian market; now hereon the earnings growth will guide the market,” added Shah.