India’s Market Cap to GDP Ratio Reaches 15-Year High

Market Cap Surges:

In a noteworthy turn of events, the combined market capitalization of all companies listed on the Bombay Stock Exchange (BSE) has witnessed a remarkable surge, soaring by 61% since the end of March 2023. This upsurge stands in stark contrast to the estimated 10% growth in India’s Gross Domestic Product (GDP) at current prices for the fiscal year 2023-24. According to recent findings, as highlighted in a report by Business Standard, India’s market capitalization to GDP ratio has skyrocketed to a 15-year high, reaching 140%. This marks a significant leap from 95.8% recorded at the close of March 2023.

Understanding Market Cap vs. GDP

The market capitalization of BSE-listed companies hit a milestone on May 21, crossing the USD 5 trillion mark, which translates to over Rs 414.46 trillion. This figure notably exceeds India’s GDP at current prices, standing at Rs 296.6 trillion for the fiscal year 2023-24. Comparatively, back in December 2007, during its previous peak, the combined market capitalization of all BSE-listed and traded companies had reached Rs 71.7 trillion. This was in contrast to India’s GDP at current prices, which stood at Rs 48 trillion over the trailing four quarters ending December 2007.

Historical Market Trends

Examining the timeline of market capitalization on the BSE, we find that the total market capitalization surpassed the USD 4 trillion mark in November 2023, and within a mere six months, it surged past USD 5 trillion. The journey began back in May 2007 when BSE-listed stocks hit the trillion mark for the first time. Over the subsequent years, this figure doubled, reaching USD 2 trillion by July 2017, and then hitting USD 3 trillion in May 2021.

Global Market Comparisons

In the current scene, only four stock markets globally boast a market capitalization exceeding USD 5 trillion as of 2023. Leading the pack is the United States, with a market cap nearing USD 55.65 trillion, followed by China (USD 9.4 trillion), Japan (USD 6.42 trillion), and Hong Kong (USD 5.47 trillion).

A historical pattern: after the previous record high in market capitalization relative to GDP, there was a notable correction in equity prices. Over the subsequent 15 months, the ratio experienced a significant decline, plummeting by nearly two-thirds to a low of 54.8% by the end of March 2009.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.