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Riding on the sharp increase in digital adoption over last 18 months, a number of internet-based tech businesses in India are expected to soon enter the equity benchmark indices such as Nifty50, a top UBS Global Research official said.
There is a strong likelihood that the weightage of the new age tech businesses in the overall market capitalisation will keep going up, even closing the gap with China and the US, Navin Killa, Managing Director, Head of Asia Telecoms, Media and Internet, UBS Global Research, said, elaborating on the impact of an increased digital adoption trend in the country on the equity market.
“If you look at the weightage of internet companies, in China it is 45 per cent of the overall market cap. In US, it is between 25-30 per cent. In India, it is below 10 per cent and hence a big opportunity to correct the gap,” he said.
Killa highlighted that UBS Research had earlier estimated the total size of Indian digital market (without including digital payments) to reach $400 billion by 2025. “The market size today is about $120-130 billion. Market opportunity is there for the size to triple over next five years. Every category may not perform in same fashion. Each and every company will have a different story. But the direction is clear in the sense that weightage of internet-based new age companies will only go up in overall market cap as more such companies list in Indian bourses,” he said.
Upcoming IPOs
Killa’s remarks are significant as a strong pipeline of internet-based businesses both in fintech and consumer tech are lined up to tap the capital markets with their IPO offering. After the recent blockbuster Zomato IPO, the new age tech companies that are IPO-bound in next few months include One97 Communications (Paytm), MobiKwik, Policybazaar and Nykaa.
Nifty to consolidate
Meanwhile, asked about the house view of Nifty target for end-December 2021 or March 2022, Sunil Thirumalai, Equity Strategist, UBS Securities, said that “our published (two weeks back) Nifty target is 16,000 with a 12 months view, implying a small downside view. Not a massive downside”. Nifty has run up quite fast and is now already well above 16000, he noted.
“Our view is that since we have seen India perform really strongly despite earnings not being same as other emerging markets …there could be some period of consolidation. Most foreign portfolio investors are finding opportunities in other markets at better valuation on better growth and earnings prospects,” he said.
The market has gone beyond 16,000, but UBS Securities doesn’t see it rising much higher in the next 12 months, according to Thirumalai.
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