The bull run in the equities continued unabated on Wednesday, with the market capitalisation of all BSE-listed companies hitting a new high of $4.03 trillion, aided by positive signals from the global markets and a fall in crude oil prices. This makes India India one of the few countries with a market cap in excess of its gross domestic product. The journey from $3 trillion to $4 trillion took two-and-a-half years.

The bellwether Sensex gained 728 points to 66,902 points, with foreign portfolio investors pumping in ₹1,786 crore. The Nifty was up 207 points to 20,096 points as buying spree by both domestic and foreign investors continued.

The market cap of BSE stocks hit $2 trillion in July 2017 and crossed $3 trillion in May 2021. The S&P BSE Sensex had gained 16 per cent since hitting its lowest in March 2020 and jumped 10 per cent since the beginning of the year.

The market capitalisation of all BSE-listed stocks surged above ₹333-lakh crore and helped India rank fifth behind the US, China, Japan, and Hong Kong, with US leading the pack with an m-cap of $48 trillion.

Growth juggernaut

With investors looking to buy into every correction and India delivering on growth and governance, the market was well-poised to deliver solid returns over the long-term, said Nilesh Shah, managing director at Kotak Asset Management.

Alok Agarwal, Head of Quant and Portfolio Manager, Alchemy Capital Management, said India’s market cap to GDP, which now stands at a little over 100 per cent against 165 per cent for the US. With the nominal GDP itself expected to grow in double digits, the outlook for Indian equities continues to remain positive.

Stock markets have been rallying for the last few days on the back of better corporate earnings in the September quarter and a drop in crude oil prices. Though domestic liquidity had supported the market rally, foreign fund inflows had tapered due to high US bond yields.

However, the dollar index has started declining on widespread expectations of interest rates in the US peaking on the back of a fall in the US inflation rate. The dollar index measures the US dollar against a basket of currencies.

Positive signal

The fall in the dollar index will make investment in emerging markets, including that of India, more attractive and pave the way for improved inflows from FPIs. The consistent decline in India’s Consumer Price Index over the past four months has also sent out a positive signal to the market.

Satish Menon, Executive Director, Geojit Financial Services, said the BSE market cap’s ascent to the $4 trillion mark signals the start of fresh momentum in the stock market.

Despite the strong fundamentals, he said there may be some volatility in the market leading up to the State election results, which are due on December 3. Having said that, we can definitely say that India’s growth story remains intact, and the market will be on an upward trajectory going ahead, he added.

Sheersham Gupta, Director, Rupeezy, said sector-specific action is more evident with the market anticipating a rate hike pause, crude price cooling down, and the easing of geopolitical tensions.

While the Nifty, comprising the large caps, is yet to cross its all-time high level, the mid- and small-cap indices have already touched their new high after a decent correction over the last two months. This indicates that mid- and small-cap stocks will continue their upward trend going forward, he said.