With stocks rallying to record peaks and the rupee appreciating to a 20-month high on the back of $13 billion moving into the stock and bond markets this year so far, India’s market capitalisation has hit $1.92 trillion. In January, 2008, India’s market capitalisation had hit $1.90 trillion. However, India, the ninth-biggest equity market in the world, contributes only 2.7% of the world market capitalization of $71.5 trillion, less than 75 basis points that it had contributed in October 2010.
The recent rally in stocks has been driven by foreign investors who have been buyers in every single session since March 1, except on Friday. The tab in 2017 so far is close to $7 billion.
The rupee has gained 5.7% so far this year to hit its highest level in 20 months; on Friday the Indian currency closed at 64.28 to the dollar. Foreign investors have bought $1.6 billion worth of bonds in the first three sessions of April on the back of purchases of nearly $4 billion in March and $891 million in February.
India’s market cap has grown by 22.5% in 2017, a pace faster than those of most peers. While the Brazilian market has risen by 12.6%, China and Hong Kong have gained 8% and 10.8%, respectively.
Despite nearly 450 companies making their debuts on the exchanges since 2008, India’s market capitalisation has stayed below the 2008 peak due to the depreciation of the rupee against the dollar. The rupee lost more than a third of its value between 2011 and 2016.
Foreign portfolio investors have shopped for equities worth $5.14 billion in March after buying $1.6 billion worth of shares in February. In the first three sessions of April they have picked up shares worth $232 million; on Friday they sold stocks worth some $40 million.
UBS noted in a report that it estimated that every 1% appreciation in the rupee could lead to a 0.6% cut in Nifty earnings. “However, the Nifty’s performance, in both absolute terms as well as relative to EM (emerging market), is stronger in periods of INR appreciation. There is circularity in this argument as equity market flows play a role in how INR moves. Global investors’ returns in USD terms also get accentuated,” the brokerage noted.
From Coal India to Avenue Supermarts, 443 companies have been listed since 2008, together adding $172 billion to market value.
Indian companies have contributed around $352 billion to the world market cap so far this year, and the Sensex has rallied 17.9% in dollar terms, the biggest gainer globally. The market value of Reliance Industries has surged by $19.8 billion.
While HDFC Bank, ITC, State Bank of India and HDFC have added anywhere between $7 billion and $12 billion, new entrant Avenue Supermarts has pitched in with another $7.3 billion.