The Indian stock market reached a historic landmark on Tuesday as it surged to a market capitalization of $5 trillion for the first time. This impressive growth was marked by the creation of $1 trillion in market value within just six months, defying the trend of foreign institutional investors (FIIs) withdrawing funds ahead of the upcoming Lok Sabha election results on June 4.
On Tuesday, the total value of all the stocks on the Bombay Stock Exchange (BSE) reached Rs 414.75 lakh crore ($5 trillion). Investors kept putting money into the market, even though the main indices, Nifty and Sensex, were not showing clear trends after rise of last week. It took less than six months for the Dalal Street market value to jump from $4 trillion on November 29, 2023, to $5 trillion on May 21, 2024.
As of now, the Nifty index is about 250 points below its all-time high, while the mid and small-cap indices hit new records on Tuesday. This part of the market’s rise has been mostly fueled by local institutions, individual investors, and wealthy individuals, even though foreign investors pulled out at least Rs 28,000 crore this month.
India’s stock market, now the fifth-largest in the world, stands behind only Hong Kong, Japan, China, and the United States. The journey to this milestone has been notable as India first hit $1 trillion in market capitalization on May 28, 2007. It took a decade to double that to $2 trillion on May 16, 2017. The pace then picked up, reaching $3 trillion by May 24, 2021, and now $5 trillion in less than three years.
Despite recent market volatility amid election-related speculations, investors are feeling better because of reassurance in comments from key political figures. Prime Minister Narendra Modi expressed his optimism about the post-election performance of the market, suggesting that market participants would be exhausted from the activity following the election results. Home Minister Amit Shah also encouraged investors to buy the dip, predicting a rise after the election.
In the future, it’s predicted that India will be the third-biggest economy by 2027. The total value of all its markets could hit $10 trillion by 2030. This guess is based on how the markets have been doing for the past 15 to 20 years, and it also considers new companies joining the market.
Due to multiple factors, India’s expanding market is catching the attention of investors worldwide, giving big players plenty of money to work with. The number of companies listed on the Bombay Stock Exchange (BSE) with a value of over $1 billion has almost doubled to 500 in the past few years. Plus, India’s stock market has been giving returns of more than 10 per cent each year for the past 5, 10, 15, and 20 years.
India’s share in the MSCI Emerging Markets (EM) index is going up from 18.3 per cent to almost 19 per cent by May 31. This change could bring in about $2.5 billion from Foreign Institutional Investors (FIIs). Analysts at Jefferies predict that India’s GDP will reach $5 trillion in the next four years. This growth will push India ahead of Japan and Germany, making it the third-largest economy by 2027. The reasons behind this growth include India’s population, stronger institutions, and better governance.
The increase in market value is also because of new companies joining the stock market, like when they first offer their shares (IPOs), sell more shares (FPOs), or existing shareholders sell their shares (OFS). Analysts from Jefferies think that these IPOs and FPOs could make up 4 per cent-5 per cent of the total market value as big Indian startups grow and companies invest more in different industries. Indian startups, which together got $100 billion in funding and are valued at about $350 billion, are likely to play a big part in this growth. Some big companies like Flipkart, Swiggy, Ola Electric, and PhonePe are likely to start trading on Indian stock exchanges soon. Also, Reliance Industries plans to make its telecom and retail arms, Reliance Jio and Reliance Retail, available for trading, which could benefit its shareholders. Hyundai India is thinking about raising $3 billion through an IPO, which might make it India’s biggest IPO ever, valuing the company at around $30 billion.
Investors from around the world really like India as a place to invest in emerging markets. As India’s market keeps growing, it will attract even more interest from big investors. This means there will be plenty of money available to invest, and chances to make big profits.
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