India Inc’s market cap set to hit $1 trillion-mark
Year 2007 is expected to be one of the biggest years in the annals of Indian entrepreneurship, reports Arun Kumar.business Updated:
With the continued robust growth combined with increased reliability to raise resources from the capital market, the year 2007 is expected to be one of the biggest years in the annals of Indian entrepreneurship.
The market capitalization of the Indian stock market is expected to cross the magic number of one trillion US dollars ($1,000 billion) in 2007-08. The current market capitalization of National Stock Exchange (NSE)-listed companies is $834 billion which is 91.5 per cent of the gross domestic products.
In term of market capitalization, India is at the fourth position in the world after the US — $17,400 billion, Japan $4,800 billion and China $1,000 billion.
The pre-budget economic survey released on Tuesday says that a current pick-up in investment activity is expected to continue in 2007-08, with resource mobilization through public issues, private placements and euro issues slated to remain encouraging in the primary market segment.
In 2006, the BSE Sensex has appreciated by a whopping 46 per cent.
The survey said a growing investor preference for mutual funds would further enhance institutional investment in equity markets, which along with regulatory support could counter-balance and cushion the impact of swings in stock prices.
Giving a firm indication that a high interest regime is going to stay, the survey says that, "there may be increase of reliance of public issues as major sources of funds for Indian corporates." In a rising interest rate regime, the primary capital markets will continue to play an important role in the Indian growth story and as Indian corporates will increasing rely on public issues to raise resources, it notes.
Interestingly, out of Rs 1,61,769 crore mobilized in the primary market in 2006, Rs 117,407 crore or 72.5 per cent of the total resources was raised through private placements. In addition, Rs 24,779 crore was raised through 75 public issues by the corporates.
The year 2006 also witnessed the emergence of a strong and vibrant mutual funds industry, which clearly indicates that Indian investors are now investing in the capital market through the institutional route.
Net mobilization of funds by the mutual funds industry increased by four fold to Rs 104,950 crore in 2006 as against Rs 25,454 crore in 2005. Buoyant inflows were seen in both debt and equity funds, taking the total mutual fund industry size to Rs 323,593 crore.
The survey also pointed out that the market continues to be robust despite slow down in the investment by foreign institutional investors (FIIs). During 2006, FIIs made a net investment of Rs 41,294 crore or $9.03 billion as against Rs 46,111 crore or $10.46 billion in the last fiscal. Domestic mutual funds also become active in the stock markets. In 2006, mutual funds made a net purchase of Rs 15,384 crore as against Rs 13,436 crore in 2005 and net sales of Rs 1164 crore in the previous year.