Strengthening rupee and surging stocks have pushed up the market capitalisation of the Indian stock market past the trillion-dollar mark for the first time since the collapse of Lehman Brothers.
After Wednesday’s lacklustre markets, when the Sensex ended with a loss of four points at 14870, the total paper wealth of Indian listed companies stood at $1.06 trillion.
The market had dipped below the trillion-dollar mark on September 15, 2008, and has since been loitering below the 13-digit mark. The market cap touched a nadir of $514 billion on March 9, 2009.
Between September 15 and March 9, portfolio flows from foreign institutional investors turned negative to the extent of Rs 29,810 crore. This put pressure on both stocks and the currency. While the rupee depreciated to an all-time low around the 52-mark against the dollar, the Sensex dipped to 8160.
But flows have since reversed. And the damage done in six months of selling has been made good in half the time.
In the past three months, FIIs have pumped in Rs 31,264 crore, taking the Sensex up 84% or 6886 points (Wednesday’s intra-day high of 15046). This has also pushed the currency up by 9.6% (it closed at 47.05 against the dollar on Wednesday) giving a double impact to the market capitalisation in dollar terms.
Besides, the broader market seemed to have gained more than the index as the market cap has doubled from the March 9 low. The rally was broad based with the mid-cap and small-cap index outperforming the large-cap index.
A bulk of the gains were made in May, when foreign flows touched an all-time high of Rs 20,606 crore. This made India the best performing emerging market for the month for the first time in 19 months and for the fourth time since 1993.
The index outperformed MSCI Emerging Markets index and other major indices by a significant margin. India’s year-to-date performance ranking rose to 3rd position out of the 23 emerging markets.
In May, the BSE Sensex was limit up for the first time since its inception (1979) and saw its best monthly performance since April 1992. But Morgan Stanley analysts Sheela Rathi and Ridham Desai point out in their monthly review, “Despite the strong monthly gain, year on year return, remained in the negative zone at -11%.”
The BSE market capitalisation is still 90% off the peak of $1.895 trillion touched at the height of the bull market frenzy in January 2008.
