India’s mcap up over 2x in 18 months

The strong bull rally that had started in late-March 2020, when global investors’ fear about the pandemic was at its peak, has taken India’s market cap to over the $3.5-trillion mark now — more than double from about $1.3 trillion then. Several factors have contributed to this record-breaking rally in global markets, including in India. These include the unprecedented amount of fund infusions by almost all the central banks to support their respective economies, record low interest rate in most of the large markets, and investors’ urge to channelise their savings in the absence of lack of spending opportunities during the pandemic months.

Official data showed that so far in 2021, both the sensex and Nifty have rallied to fresh life-high marks around 40 times each. However, the Indian benchmarks still lag their US peers. For example, the corresponding number for the S&P500 index is 54 times.

Last month, the rally got another boost after the US Fed chief said that it was unlikely to raise interest rates in a hurry. As a result, the sensex added nearly 5,000 points, or 9.4%, making India the best performing stock market in the world.

Domestically, the biggest booster to investors’ wealth during the current rally since March 2020, as measured by the BSE’s market capitalisation, came from Reliance Industries that saw its market value jump by $134 billion to $210 billion now. The other significant wealth-creators are TCS, up $110 billion to $191 billion, and Infosys — up $70 billion to $110 billion now, official data showed.

According to a report by Motilal Oswal Financial Services, the markets are scaling new highs led by strong earnings delivery, benign liquidity and buoyant sentiments. “Good earnings delivery (during first quarter of fiscal 2022) has boosted hopes for a solid FY22 with 30%+ projected Nifty earnings growth, on the back of a strong 15% earnings growth in FY21,” it noted. In addition to strong corporate earnings, a stable currency that’s been showing an appreciating trend in the past two weeks also attracted foreign funds into Indian markets with the net buying for 2021 at over Rs 55,000 crore, data from CDSL showed.

In future, management commentaries across the board suggest an improved demand environment after June 2021, led by easing of restrictions, lower active Covid cases, and a pickup in vaccinations, the report by MOFSL noted.

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