The market capitalisation of BSE-listed companies hit a record $5 trillion on Tuesday as sustained flow of domestic money and strong economic growth prospects fuelled investor optimism.It took less than six months for the market capitalisation to jump from $4 trillion to $5 trillion – the fastest $1 trillion gain ever.
The rupee has also been flat during this period. It closed at `83.31 against US dollar on Tuesday as against Rs 83.33 on November 29, when the $4-trillion milestone was achieved. At close, the total valuation stood at an all-time high of $4.97 trillion. US, China, Japan, and Hong Kong are ahead of India in terms of market capitalisation of companies.
DP Singh, joint CEO, SBI Mutual Fund, said that it was not surprising given the kind of money that is flowing into the market on regular basis. “It is a positive sign and will put us in a healthy trajectory in the globe,” he added.
The Sensex, however, closed flat at 73,953.31 – down 52.62 points or 0.1%. The Nifty rose marginally to close at 22,529.05 – up 25.05 points or 0.1%.The indices continued to face high volatility, with the India VIX rising 6% and above 22 during the day. It closed at a 20-month high of 21.81. The fear gauge has more than doubled in the last one month due to uncertainty over the number of seats that incumbent government can win in the ongoing elections.
Experts attributed Tuesday’s increase in India VIX to low voter turnout in the fifth phase of the voting, interpreted as a negative for the incumbent government, on Monday.Notwithstanding the intermittent volatility, Indian equities have been buoyed by persistent inflows from domestic investors, particularly retail investors, amid changing demography and strong economic growth prospects. Last month, SIPs through mutual funds surpassed `20,000 crore for the first time.
However, some experts see the volatility as an opportunity. “At a macro level, when India will grow from $4 trillion to $8 trillion, any volatility should be seen as an opportunity…. One should have a long term view instead of timing the market” said Swarup Mohanty, vice chairman and CEO of Mirae Asset Investment Managers (India).”With India projected to remain the fastest-growing major economy, inflation being at manageable levels and expectations of continuity of reform thrust, the outlook for the Indian stock market remains positive over the medium term though some hiccups may be expected in the interim,” said Dhiraj Relli, MD and CEO of HDFC Securities.
On Tuesday, BSE Midcap index and BSE Smallcap index hit their fresh lifetime highs in intraday trading, while the benchmark Sensex, too, is hovering around its fresh high levels.