India rises up the ranks in global m-cap race

livemint.com:

₹300 trillion mark).   While a share in global market cap will reflect the vagaries of the stock market and its relative performance to other markets, the long-term trend is unmistakable. India’s share rose from 1.6% in 2006 (and the historical average of 2.6%) to 3.3% this June.

Its increase was driven by a rise in stock prices—the Sensex jumped from 10,000 in July 2006 to over 65,000 now—and also by new listings. In the long term, India’s share in global market cap is likely to increase further, but remain smaller than the US and China, reflecting the relative size of these economies. The nature of the market is expected to change too.

In the US, the top five companies by market capitalization are tech companies. A 2021 Goldman Sachs report pointed out that “India is among the ‘oldest’ in the region, with the average listing age exceeding 20 years versus 9 years for China". The questions around overvaluations are expected to continue.

  India's market capitalization might already be overvalued by the Buffett Indicator, or market capitalization-to-GDP ratio. Named after fabled investor Warren Buffett, it is used to assess how expensive or cheap the aggregate stock market is at a given point in time. According to an analysis by Motilal Oswal Financial Services in April 2023, at 95% at the end of 2022-23, the indicator was higher than its historical average of 81%.

However, since it depends on the market prices of stocks, it can be volatile. In recent times, the ratio moved between 56% (at the end of 2019-20) and 112% (at the end of 2021-22). The key idea behind the Buffett Indicator is that market capitalization is ultimately tied to a country's economic performance.