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BSE market-cap nears $2.7 trillion, how many months could it take to hit $3 trillion?

The future earnings trajectory is very strong and a higher upside in the overall market could be a function of how much more earnings upgrades we see going forward.

February 10, 2021 / 10:23 AM IST

One of the world's oldest stock exchange - the BSE - is now also among one of the biggest in terms of market capitalisation (m-cap).

BSE is the seventh biggest stock market in the world as the total market capitalisation of the exchange nears $2.7 trillion.

Media reports suggested that BSE was bigger than the markets of Canada and Germany. In rupee terms, the overall m-cap of BSE is Rs 202 lakh crore as of February 9 close.

India's market is one of the fastest-growing emerging markets. On February 3, the market benchmark Sensex closed above the psychological mark of 50,000 for the first time. In the calendar year 2021 so far, Sensex is up 7.5 percent.

The Sensex has come a long way from its humble beginnings in 1986 when it traded at 549 while setting the base year of 1978–79 as 100.

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Brokerage firm Motilal Oswal pointed out that on this journey, the Sensex has mirrored the economic growth of the country from the pre-liberalisation phase to now emerge as one of the top economies of the world while overcoming the challenges of Asian financial crisis, dot com bubble, global financial crisis, taper tantrum to the Covid-19 pandemic and coming out triumphant.

How far is the $3 trillion mark for BSE?

The outlook for the market is positive for the long run. However, in the near term, there may be some speed-breakers in terms of rupee depreciation and market correction.

Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities said it is difficult to pinpoint the exact timing of when we hit the $3 trillion mark.

"Based on our overall assessment, it could be sometime early next year when we could see this figure of $3 trillion in overall BSE market capitalisation."

Oza expects some currency depreciation in the second half of the year 2021 which will increase the run rate required to achieve the $3 trillion mark for overall BSE market capitalisation.

"Based on the current momentum, we may see some near-term upside but from a CY21-end perspective, we see flat to the single-digit upside," Oza said.

He expects global interest rates and bond yields to rise in the second half of CY21 which could cap upside in equities in the second half of CY21.

The future earnings trajectory is very strong and a higher upside in the overall market could be a function of how much more earnings upgrades we see going forward, Oza pointed out.

Experts now expect a fresh multi-year investment cycle given positive drivers in both the household and private sectors which will augur well for the market.

In FY21, nominal GDP is likely to de-grow by 4 percent whereas in FY22 it is likely to grow by 14.4 percent, as per Budget estimates. This will drive credit offtake and uptick in most economy driven sectors and they will be the drivers of the market.

"Sectors that can outperform and contribute to the uptick of the market are capital goods, oil & gas, cement, real estate and metals," said Oza.

Oza believes the Nifty Bank index still has the potential to move up another 20 percent in the next year if it has to go to its previous peak valuations on the forward price/BV basis.

BFSI pack which accounts for nearly 40 percent weight in Nifty50 and Reliance Industries which accounts for more than 10 percent could be the main driver of Nifty50 in the next year, Oza said.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Feb 10, 2021 09:26 am

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