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Last Updated : Jul 11, 2017 08:15 AM IST | Source: Moneycontrol.com

Believe it or not, Indian market is heading towards $4 trn market cap in next 5-7 years

Investors could focus on individual business and fundamental factors relevant for the valuation of companies


The Indian market witnessed record highs on Monday, but a tech glitch on the NSE halted trading on the Nifty for over three hours. Incidents like these do hamper traders’ sentiment in the short term, but for long term investors, things are very much intact.

India is still a buy on dips market and any correction in the intermediate short term should be used to buy quality stocks, suggest experts.

“An issue like the technical glitch with NSE can happen with any system. We all must understand and cooperate. Hope it would never recur,” Nirmal Jain, Chairman, IIFL Group said.

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The market, with USD 2 trillion market cap, has already rallied by about 18 percent so far in the year 2017 and was among top performing markets across emerging markets.

The rally in the index was led by the confluence of positive factors such as strong liquidity, implementation of GST, expectations of above normal monsoon, the BJP’s victory in municipal and UP elections, and minimal impact of demonetisation.

India’s share in the world market cap is at 2.6 percent, which is now above its long-term average of 2.4 percent. Over the last 12 months, world market cap has increased 20.4 percent (USD 12.8 t), while India’s market cap is up 28 percent, said a Motilal Oswal report.

Although, India’s share in world market cap is above long-term averages analysts are not concerned about it because the way India’s fundamentals have shaped in the last few years and with the implementation of the goods & services tax this number will only increase.

“It is not something to be worried (India’s market cap above long term averages) though a lot of it is due to liquidity. We also need to look at fundamentals as well that align themselves over a period of time with the rise in equity market returns,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.

Sachin Relekar, a fund manager at LIC MF advises investors to focus on individual business and fundamental factors relevant for the valuation of companies. “Macro backdrop for investment with long-term horizon is positive,” he said.

valuation

India’s market cap stands at USD 2 trillion which is above Taiwan, Indonesia, Korea and Russia. Analyst expects it to almost double in the next 5-7 years led by strong fund flows from global as well as domestic investors.

India is on the cusp of earnings rebound and further re-rating of the market will happen once India Inc. starts delivering on the earnings front. But, right now liquidity is driving markets higher and any negative news would at best lead to a knee-jerk reaction.

“India’s market cap is suggestive of increasing expectation and performance India’s economy vis-à-vis world economy, so it is expected to go up even further,” Rishi Kohli, MD & CIO, Monsoon Capital told Moneycontrol.

“We should be able to hit $4 trillion market cap in the next 5-7 years assuming a growth of 10-15 percent CAGR over the next 5-7 years,” he said.

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First Published on Jul 11, 2017 08:15 am
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