Mcap of BSE-listed firms beats Hong Kong again, ranks fourth globally

Indian markets saw significant volatility after the election results. On June 4, the market declined by over 6%, but since then, it rebounded and hit a record high

The total market cap of all BSE-listed companies has pipped Hong Kong again to become the fourth-highest equity market globally.

Currently, BSE all listed mcap stood at $5.18 trillion as against $5.17 trillion for Hong Kong, according to data from Bloomberg. Currently, the US is the world’s biggest market with a mcap of $56.49 trillion, followed by China with a mcap of $8.84 trillion and Japan at $6.30 trillion.

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Last time on January 23, Indian markets surpassed Hong Kong, but Hong Kong soon regained its fourth position. Since April, Hong Kong’s Hang Seng Index surged over 12%, entering a bull market with a nearly 20% rise from its January low. This recovery follows years of losses due to China’s economic concerns and geopolitical tensions. Factors such as a stronger Chinese economy, lower valuations, and increased mainland investments have revitalized the market. Additionally, China’s Rmb300bn ($41bn) fund to support the real estate sector has further boosted market sentiment.

Meanwhile, last week, Indian markets saw significant volatility after the election results. On June 4, the market declined by over 6%, but since then, it rebounded and hit a record high. The total market cap of all listed companies on the BSE increased by over Rs32 lakh crore, reaching a new high of Rs432 lakh crore ($5.18 trillion).

India has an NDA government supported by 300 MPs, but it is not a single-party majority. After 25 years of coalition rule before 2014, BJP and PM Modi’s ability to run a minority government will be tested, despite continuity in key ministries being positive.

Prabhudas Lilladher in its latest note said it expect the NDA to focus on capex-led growth in sectors like PLI, roads, ports, aviation, defense, railways, and green energy, aided by a 20bps lower fiscal deficit in FY24, normal monsoons, and a Rs 2.1 trillion RBI dividend. However, they also expect increased attention on farmers, rural areas, the urban poor, and the middle class to counteract the impact of recent social engineering and freebies in some states.

The two near-term triggers for the market are the Budget and June quarter earnings. Concerns about changes to the capital gains tax have eased, and the Budget is expected to be a mixed bag.

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IIFL Securities noted that the BJP’s struggle to secure 240 seats and the presence of many new significant faces could jeopardize majority support. This may hinder fiscally and politically challenging reforms, lead to more populism, and impact medium-term growth (currently at a satisfactory 6.3% for GVA in Q4).

This will likely cause a market correction, initially affecting overpriced sectors like PSUs and capital goods, but eventually becoming more widespread (up to 10% correction) as growth estimates adjust. Instead of being fully defensive, they recommend focusing on stocks with decent growth, less dependence on government actions, and strong valuations, especially large caps in sectors like auto, consumer, banks, and NBFCs. IIFL Securities expects near-term underperformance in capital goods, defense, and power, while cement, pharma, and healthcare should do well.

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