India’s Stock Market Surge: A Closer Look at the Recent Trillion-Dollar Rally

India, now the fifth-largest equity market globally, has witnessed a remarkable surge in its market capitalization, adding over USD 1 trillion in the last six months. This relentless rally has propelled the frontline indices to new record highs, driving increased participation in the market.

Market Capitalization Surge

Since the start of 2024, the combined market capitalization of companies listed on Indian bourses has surged by 24.5%, reaching USD 5.23 trillion. In contrast, China, the second-largest market, saw a significant erosion of USD 1.06 trillion in market capitalization during the same period.

While Japan’s market remained relatively flat over the last six months, Hong Kong, the fourth-largest market, managed to add just USD 428 billion. In absolute terms, India only saw a similar magnitude of increase in 2007, when the market capitalization grew by USD 1 trillion to USD 1.81 trillion. This recent surge is attributed not only to rising stock prices but also to the listing of new companies on Dalal Street.

Investor Sentiment and Inflows

Recent data shows that investors now prefer India over China. Most of these investments are coming from the US and are focused on large-cap funds. Meanwhile, mid- and small-cap segments are still waiting for a similar boost.

In the past few weeks, the USA contributed the largest inflow at USD 700 million, followed by substantial investments from Ireland (USD 447 million) and Japan (USD 433 million). Korea also added USD 130 million to these inflows.

In contrast, China faced significant outflows totaling USD 2.3 billion during the same period. Japan witnessed outflows of USD 753 million, and substantial fund withdrawals were observed from Taiwan and Brazil, further highlighting India’s growing appeal.

Foreign Portfolio Investors’ Shift

Foreign Portfolio Investors (FPIs), who were selling off their investments in April and May, have now started buying again. They purchased stocks amounting to nearly USD 1.4 billion in the last five trading sessions up to June 14, 2024. This shift contrasts sharply with April’s net selling of USD 1.04 billion and May’s outflow of USD 3.06 billion, signaling renewed confidence in India’s market prospects.

Leading Stocks by Market Capitalization

Reliance Industries currently tops the market capitalization league table with over USD 245.3 billion. Tata Consultancy Services (TCS) follows as the second-largest company, commanding a market valuation of USD 167 billion. India now boasts five companies with a market capitalization of at least USD 100 billion, including HDFC Bank, Bharti Airtel, and ICICI Bank. Together, these five companies contribute 14.5% to the total market capitalization of USD 5.23 trillion (as of June 26).

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions