Indian Stock Market Surges to Historic $5 Trillion Milestone

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The Indian stock market reached an unprecedented landmark on Tuesday, achieving a market capitalization of $5 trillion for the first time in history.

Rapid Wealth Creation

The stock market’s remarkable growth saw a wealth increase of $1 trillion in just six months, defying a significant foreign institutional investor (FII) pullout ahead of the Lok Sabha election results on June 4.

The combined market capitalization of all listed stocks on the Bombay Stock Exchange (BSE) surged to Rs 414.75 lakh crore ($5 trillion) as investors continued buying stocks despite the Nifty and Sensex struggling for direction after last week’s rally.

Historical Growth Trajectory

The BSE’s total market capitalization reached $4 trillion in November 2023 and has now soared past $5 trillion in just six months.

BSE-listed firms first achieved a market cap of $1 trillion in May 2007, doubling to $2 trillion by July 2017, and reaching $3 trillion in May 2021. The latest journey from $4 trillion on November 29, 2023, to $5 trillion on May 21, 2024, took less than six months.

Indices Performance and Investor Influence

The Nifty index is now about 250 points away from its all-time high, while mid and small-cap indices hit new peaks during Tuesday’s session.

This leg of the bull run has been driven by domestic institutional, retail, and high net worth individual (HNI) investors, even as FIIs have pulled out at least Rs 28,000 crore this month.

Global Market Ranking

India’s stock market now ranks as the fifth largest globally, behind Hong Kong, Japan, China, and the US. The country first hit the $1 trillion mark on May 28, 2007, with subsequent milestones of $2 trillion on May 16, 2017, and $3 trillion on May 24, 2021.

Political Stability and Market Confidence

Recent weeks have seen market volatility amid election-related speculations. However, investor confidence was reinforced by remarks from Prime Minister Narendra Modi and Home Minister Amit Shah.

“You will see that in one week within June 4, the day election results would be declared, market participants would get tired,” PM Modi stated in an interview with NDTV. Amit Shah also urged investors to buy the dip, predicting a market rise post-election.

Future Projections and Economic Growth

India is projected to become the third-largest economy by 2027, with the market cap expected to reach $10 trillion by 2030, assuming returns align with the past 15-20 years and new listings continue.

The increasing size of the market makes it difficult for large investors to ignore, providing ample liquidity for big players.

Consistent Market Returns

India is among the top emerging markets, consistently delivering annualized returns above 10% over the last 5, 10, 15, and 20 years. In 2024 so far, India’s market capitalization has grown nearly 12%, outpacing the US and China.

MSCI Emerging Markets Index and Potential Inflows

India’s weightage in the MSCI Emerging Markets index is set to increase from 18.3% to closer to 19% from May 31, potentially leading to FII inflows worth about $2.5 billion.

“Over the next four years, India’s GDP will likely touch $5 trillion, making it the third-largest economy by 2027, overtaking Japan and Germany,” said Jefferies.

New Listings and Market Expansion

New IPOs and FPOs are expected to significantly boost market cap as Indian unicorns mature and capital expenditure increases. With cumulative funding of $100 billion, Indian unicorns command a valuation of around $350 billion.

Companies like Flipkart, Swiggy, Ola Electric, and PhonePe are anticipated to list on exchanges soon, while Reliance Industries may unlock shareholder value by listing Reliance Jio and Reliance Retail.

Upcoming IPOs

Hyundai India has shown interest in raising $3 billion through a potential IPO, which could become India’s biggest IPO at a valuation of up to $30 billion.