Growth in India’s Stock Market
- April 9, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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.