Last year, for the first time, the Bombay Stock Exchange (BSE) ranked among the top 10 exchanges in the world in year-on-year change in market capitalisation. Data compiled by the World Federation of Exchanges shows that the market capitalisation of the BSE more than doubled last year as compared with 2008 on the back of a record $17.5 billion pumped into Indian equities by foreign institutional investors.
This indicates institutional investors growing appetite for Indian stocks and analysts say the trend will continue this year too but the rate of growth will come down. From a low of 8,000 points in March last year, the Sensex recovered to touch 17,000 points and gave 80% annual return, the second best in two decades.
The same is true of Brazilian Bovespa that saw a record 126% growth in market capitalisation last year as compared with 2008, underlining the fact that the returns are higher in emerging markets. On the other hand, the New York Stock Exchange (NYSE) and Tokyo Stock Exchange (TSE) saw marginal year-on-year growth in market capitalisation. The Shanghai Stock Exchanges year-on-year market capitalisation grew 90%, the third highest amongst the 10 exchanges.
Though the BSE may have reported an impressive year-on-year growth, absolute numbers are not too impressive. With a total market capitalisation of $1,306 billion in 2009, it is the lowest amongst the top 10 exchanges, indicating that it needs to broad-base and encourage retail investors to participate actively in the markets.
The NYSE has retained its position as the largest with equity market capitalisation at $11,838 billion last year, followed by TSE at $3,306 billion. Even Bovespa, despite showing the highest year-on-year change in market capitalisation, still ranks low in absolute numbers. Going ahead, fundamentals will play a key role in stocks of Bric countries this year as institutional investors would be selective in their stock picks.