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India’s market capitalisation-to-GDP ratio slips to 95 in FY23, shows data

market is undervalued
float market capitalisation

To begin with, let’s look at the graph of the world market cap to GDP. It indicates that the two peaks when the Market Cap / GDP ratio crossed the 100% mark represent the two massive peaks of and 2007. In 2017 market once again touched the 100 mark but corrected quickly. However, since 2020, amidst the worldwide pandemic devastation, the markets have been above the 100 mark. However, since high-tech manufacturing is moving to the US, inflation will be structural and may remain elevated (above 4%) for the medium term (3 years+).

Corporate profit growth had given indications that the capital cycle is showing green-shoots of turning around. That means that the sales numbers across sectors should pull up and that will be a major positive for the GDP number. That will make the market cap / GDP ratio look a lot more benign.


The small and midsize enterprise sector and low-income households are vulnerable to rising interest rates and high inflation, but it expects these risks to be limited, the agency added. The Nifty is trading at a 12-month forward RoE of 15.6 per cent, above its long-term average, Motilal Oswal said in its report. Elearnmarkets is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all. 1) KYC is one time exercise while dealing in securities markets – once KYC is done through a SEBI registered intermediary (Broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

Increasing a listed company’s shares available for trading needs to target a minimum ‘free float’

With a positive earnings momentum in the current cycle, it sees higher levels of the m-cap to GDP ratio in the coming quarters. Domestic mutual fund houses have resumed accepting lump-sum contributions to their international equity plans after the latest Finance Bill removed tax advantages for debt-oriented saving plans from April 1. Onshore plans that invest in overseas markets are treated as debt funds locally for taxation purposes.

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  • Free-float method of evaluating market capitalization uses this float, though it excludes the shares which are owned by company executives.
  • Despite some recent corrections in the wake of the Russia-Ukraine crisis, Indian equities remain expensive and markets remain overvalued.

The indicator value for India stood at 105 level as of October end, based on FY23 projected nominal GDP levels. This is even as the 12-year average indicator value for India stands at only 79 level, suggesting the domestic stocks are overvalued. But the stock market isn’t a sandwich – it’s vast and diverse with companies from sectors like finance, pharma, and others.

India’s market capitalisation-to-GDP at 116%, highest since 2007

Fluctuating market conditions and stock prices also impact the evaluation of a company when this method of evaluation is being used. For investors, understanding the value of a company is imperative while creating a long-term investment plan. There are 3 things you need to be wary of before using this measure. Essentially this becomes ratio of a stock to a flow, almost like the Price to Sales ratio. Hence, the numerator and the denominator may not be strictly comparable. Thirdly, a lower Market Cap / GDP ratio is not always a sign of undervaluation.

It also depends on how much is the stock market penetration of your economic activity. That is why the Market Cap / GDP ratio is much above 100 in advanced countries like the US, UK and Singapore where more of business comes under the formal sector. So 88% cannot be assumed to be a sign of undervaluation in the Indian context. If you were to read analyst reports on market valuations, the most common measure is market P/E. Undervaluation and overvaluation does work quite well at a market level. For example, if you have bought into the markets in 2003 or in 2009 when the P/E ratio was closer to 12, you would have surely made a lot of money.

Q. How do you interpret a Buffett Indicator?

The market cap to gdp ratio india Market Capitalisation/GDP ratio has been quoted to be the “single best measure of where valuations stand at any given moment” by Warren Buffet in a December 2011 article for Fortune magazine. Gain useful insights like these with our NSE Academy Certified Macroeconomics course on Elearnmarkets. The course develops your analyzing skills and you’ll even be able to predict the effects of implementing new monetary and fiscal policy. India’s m-cap now account of 3.5 per cent of the all listed companies in the world. The country enjoyed a m-cap percentage of 3.3 per cent somewhere in 2010.

The weightage of the technology sector fell 530 basis points YTD to 13.8%, while weightage of the consumer sector rose 180 bps to 11.2%. FPIs withdrew $1.6 billion in September after clocking the highest inflows since December 2020 in the previous month. Domestic institutional investors have turned net buyers at $1.7 billion in September after recording outflows in August. India has returned -10% in dollar terms year-to-date , far behind Brazil, which has gained 8%. But it’s way ahead of most other major markets like US, Japan, China, Taiwan, France, Germany and South Korea, which have returned -25% or lower.

TMS Ep392: Gopinathan’s exit, angel tax, Jim Rogers, m-cap to GDP … – Business Standard

TMS Ep392: Gopinathan’s exit, angel tax, Jim Rogers, m-cap to GDP ….

Posted: Mon, 20 Mar 2023 07:00:00 GMT [source]

Britain’s exit from the European Union, Donald Trump’s surprise win in USA, demonetization, and GST in, relying on any one indicator to deploy or employ money is unsuitable. Invest in stocks with Free Expert Advice only with MO INVESTOR. In its model portfolio, it maintained its overweight stance on BFSI, auto, Consumer and IT sectors while it maintained its underweight stance on energy, pharma and utilities. US m-cap share stands at 45 per cent of the world’s m-cap, China’s 9.6 per cent, Japan 5.3 per cent and Hong Kong 4.3 per cent.

Stock Market

The current total market cap to GDP ratio of India for mid-December 2020 is 72.35%. At some point in time Reliance Retail , Reliance Jio , Zomato , Paytm Indiamart Intermesh and so on shall find a place in the benchmark index at the expense of Coal India , BPCL , NTPC , Power Grid . Assessment of market valuation through the Nifty PE ratio or market cap to GDP would become totally meaningless at that point in time. Due to the volatility and uncertainty of the current India economy, the investors must focus on Market Cap to forward GDP, rather than current GDP. Prediction of Indian economy’s GDP being less than 7 percent as an aftermath effect of demonetization was proved wrong in the October-December quarter.

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These are well-established companies with a significant market share. According to SEBI, listed companies ranked from 1st to 100th depending on market capitalisation are called large-cap. Moreover, listed companies ranked from 101st to 250th are called mid-cap, and those ranked from 250th onwards are called small-cap. There are quite a few factors which impact the market cap of a company. Learning these factors can aid investors in judging if a specific company is expected to offer good returns. Typically, these companies have reached the pinnacle of their growth, and as a result, there is a lesser chance of any drastic change in stock prices.

The other interesting facet of the 75 years of India’s independence is how businesses spawned in pre-independent India or in early independent India have grown and retained their leadership positions. Did you know that The Indian Hotels Company was incorporated in 1902, Tata Steel in 1907 and ITC in 1910? These companies have been around for decades and have continued to lead their sectors. They have also created immense wealth for their shareholders. We pulled out a list of prominent listed companies incorporated before independence or in 1947 and we were surprised to find a big bunch of wealth creators. What this suggests, is that if the Indian economy can continue to grow at a healthy pace over the next 5-10 years, there is no reason to believe equities won’t continue to reflect their past performance.

india’s market cap

At certain times, they have plainly shown defiance at the pessimistic attitude of the international markets. India’s overall weight has risen within the MSCI Emerging Market Index. This has openly been a winner against its heavyweight neighbour, China. If this is placed within the context of the Indian economy’s recovery with regard to growth, the sentiment of the stock markets can be fully justified.


It is the highest since December 2008, when it had hit an all-time high of around 150 percent. A non-promoter shareholding of 25% sounds like good public policy but it is of little use if this doesn’t result in an adequate liquidity in the secondary market. Nilesh Shah says the Indian banking system is in a far better position. For example, SVB, out of their $200 odd billion balance sheet, could put $100 billion into the HTM category. The Reserve Bank of India caps how much you can put into the HTM category. In India’s case, the deposit base is widely distributed geographically, as well as across various industries.

In this case, interest rates may stay at higher levels for longer periods. As the chart shows, the Nasdaq 100, comprising big tech stocks, crashed by one-third from its peak due to a global slow down, high inflation and the Russia Ukraine conflict. While the technical indicators suggest that the index might have bottomed out, fundamental indicators say something else. India’s valuation premium against other emerging markets especially MSCI Emerging Market Index has started correcting. Valuations – Market cap to GDP ratioCurrent market cap to GDP ratio is at Current market cap to GDP ratio is at 100%, above its long-term average of 79%. The other important takeaway from India’s 75-year history of independence is that it pays not to keep all your money in one currency.

It was during this period when the Central Statistics Organisation CSO) announced that India was growing at a healthy GDP rate of 7% and further pegged its advance GDP growth estimate for 2017 at 7.1 percent. Having said that, India’s current market cap to GDP ratio stands at 77% (according to which indicates that there is still scope for the economy to rise and grow. One of the key drivers of GDP growth is corporate profits, and the IIP numbers do indicate that the capital cycle is showing green-shoots of turning around. That means that the sales numbers across sectors should pull up, which will be a major positive for the GDP number. Interestingly, the year 2017 saw the market cap / GDP ratio of India crossing the 100% mark after a gap of almost 10 years. Firstly, there is room for caution, and that is evident from the way markets have corrected from higher levels.


25 kwietnia, 2022

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