India’s market capitalisation hit a record $3.75 trillion on September 4, propelled by inflows from domestic and foreign investors as well as a stream of new listings. According to Bloomberg data, Indian equities are ranked fifth in the world by market capitalisation, behind the US, China, Japan and Hong Kong.
MARKET CAP EXPANSION DOES NOT NECESSARILY MEAN CORRESPONDING RETURNS
China’s market cap rose 67% to $9.8 trillion in the past five years, but the Shanghai Composite Index gained just over 15% during the period.
In contrast, India’s market cap increased 71% while the Nifty50 index gained 69% in the same period Newer IPOs can add to market cap without existing investors gaining.
VALUATION ISSUES These are also signs valuations may be getting stretched and future returns may moderate.
