Growth in India’s Stock Market

Growth in India’s Stock Market

Subject: Economy

Section: Capital markets

Record Market Capitalization:

• • India’s stock market achieved a significant milestone with a combined market capitalization of over Rs 400 trillion for all BSE-listed firms.
  • This milestone was reached in just 9 months, marking the shortest period for a Rs 100 trillion market cap increase.
• Market Performance:
  • BSE Sensex has surged about 15% in the last 9 months.
  • Midcap and smallcap indices have seen even stronger growth, with each surging about 40%.
• Contributing Sectors:
  • Leading sectors contributing to the rally include Realty, PSU banks, Auto, Energy, Infra, and Pharma.
  • Public Sector Units (PSUs) have been standout performers, with indices nearly doubling in one year.
• Factors Driving Growth:
  • Buoyant economic indicators, increasing domestic investment, and political stability underpin the market surge.
  • Increased domestic retail participation with over 15 crore demat accounts by March 2024.
  • Robust IPO activity with 24 IPOs raising over Rs 67,500 crore indicates strong appetite for new market entrants.
• Economic Fundamentals:
  • India’s recent GDP growth rate stands at 6%, outperforming projections.
  • Encouraging corporate earnings estimates, with expectations of 6-8% earnings growth in Q4FY24.
  • Sectors like banking, healthcare, and energy are poised for growth.
• Investor Confidence:
  • Retail investors remain optimistic, particularly in small- and mid-cap stocks.
  • Confidence in continued political stability under the BJP government.
• Future Outlook:
  • Earnings season focus on the IT sector, with expected revenue growth for firms like TCS and Infosys.
  • Market movement influenced by global factors, particularly US Fed rate decisions.
  • Analysts advise selectivity in stocks, caution against temporary index jumps.
  • Markets likely to remain range-bound until the June 4, 2024 general election results.
• Post-Election Expectations:
  • Significant market movements anticipated post-elections, influenced by results, the final Union Budget, US Fed decisions, and corporate earnings.

Market Capitalisation Definition:

Market capitalisation is the total value of a company that is traded on the stock market. It is calculated by multiplying the total number of shares by the current market price per share.

Formula for Market Capitalisation:

Market Capitalisation=Total number of outstanding shares×Current market price per shareMarket Capitalisation=Total number of outstanding shares×Current market price per share

Example Calculation:

Suppose:

• Current market price of XYZ company = ₹10
• Total number of outstanding shares of XYZ company = 100,000

Then, Market Cap of XYZ company=100,000×10=10,00,000Market Cap of XYZ company=100,000×10=10,00,000

Classification by SEBI:

Companies registered with SEBI are classified based on their market capitalisation into three categories:

• Large Cap:
  • Companies ranked between 1 and 100 by market capitalisation.
  • These are typically large, established companies.
• Mid Cap:
  • Companies ranked between 101 and 250 by market capitalisation.
  • These are generally medium-sized companies with moderate market capitalisation.
• Small Cap:
  • Companies ranked beyond 250 by market capitalisation.
  • These are often smaller companies with relatively lower market capitalisation.