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Investors in Indian equities richer by $ 500 billion

India’s overall market capitalisation, or the value of all shares traded in the country, rose by $503.6 billion (Rs3.22 trillion) since the beginning of the year, second only to Hong Kong among emerging markets.

business Updated: Jul 28, 2017 13:43 IST
Nasrin Sultana
Nasrin Sultana
Mumbai, Livemint
Indian equities,NIFTY,SENSEX
File photo of brokers & share holders at Kolkata share market reacting to a Sensex and Nifty rally. So far this year, the benchmark Sensex and Nifty have gained around 22% each while the BSE small cap index has climbed by nearly a third.(PTI)

Investors in Indian equities are richer by half a trillion dollars since the beginning of the year as optimism in the nation’s economic growth story and hope of more reforms from the government lift share prices.

India’s overall market capitalisation, or the value of all shares traded in the country, rose by $503.6 billion (Rs3.22 trillion) since the beginning of the year, second only to Hong Kong among emerging markets.

Hong Kong shares gained $752.8 billion in 2017, just behind the US market’s $2.38 trillion. Still, among the larger markets India’s growth in percentage terms was the highest at 32.2%.That is almost double the growth in the world’s total market capitalisation.

To be sure, one reason for India’s strong performance among global markets is the rise in the rupee versus the US dollar. Since January, the rupee has gained 5.9% against the greenback, boosting India’s performance when measured in dollar terms.

The fact that overall investor wealth, albeit on paper, grew faster than the benchmark indices shows that the rally in shares has been broad and across sectors and companies. So far this year, the benchmark Sensex and Nifty have gained around 22% each while the BSE small cap index has climbed by nearly a third.

The 32% rise in stock value has boosted the country’s overall market capitalisation beyond $2 trillion. In comparison, India’s gross domestic product for this year is estimated at $2.45 trillion (Rs157 trillion), according to the International Monetary Fund. Or take India’s total commercial bank deposits, which stand at $1.65 trillion (Rs106 trillion).

India’s market capitalisation would be much higher had some companies, which are still not listed on stock exchanges, come to the market, said Pankaj Pandey, head of research at ICICI Securities Ltd.

Indeed, one reason for the boost is new companies coming to the market through initial public offers like Avenue Supermarts Ltd, which runs the D-Mart retail chain. Avenue, which listed in March, has a valuation of Rs 56,077 crore (around $8.7 billion).

However, the biggest increase in shareholder wealth, although notional, has come from some of the oldest and largest blue chip stocks.

Reliance Industries Ltd, India’s most valuable firm, added Rs1.69 trillion in shareholder wealth this year. The company’s ambitious $2-trillion investment in telecom markets has been welcomed by investors, who pushed its overall valuation beyond Rs5 trillion, the second company to do so. Last week, the company announced it was targeting the 500-million strong feature phone segment with the launch of its JioPhone, which extended its stock rally this year to 48%.

The other companies in the pecking order which have added maximum shareholder wealth this year include HDFC Bank Ltd and its parent Housing Development Finance Corporation Ltd. Overall, eight Indian stocks have added at least Rs50,000 crore in market capitalisation this year.

Anand James, chief market strategist, Geojit Financial Services said, “India is seeing a hope-driven rally on expectations of political stability and economic reforms like goods and services tax (GST), which may benefit the country at a later stage.”

First Published: Jul 28, 2017 13:42 IST