Market cap of BSE-listed companies crosses GDP, first time since 2007
BSE market capitalisation is up by nearly 75 percent since March 2020.
January 15, 2021 / 09:53 AM IST
The combined market capitalisation of all the listed companies in India has crossed the country's Gross Domestic Product (GDP) for the first time in over a decade. The last time this happened was in 2007 when the m-cap to GDP ratio was 100.7 percent.
The m-cap to GDP ratio on the Bombay Stock Exchange (BSE) reached Rs 197.7 trillion on January 14, against India's nominal GDP of around Rs 190 trillion during the year ended December 2020, Business Standard reported.
The ratio is, however, still lower than the all-time high of 149.4 percent in December 2007. Comparatively, the ratio was 99 percent in December 2020, 56 percent at the end of March last year, and 78 percent at the end of December 2019, the report said.
The GDP number is based on the advance estimates for FY21 released by the National Statistical Office (NSO). According to the NSO's estimate, the nominal size of India's gross domestic product (GDP) in the current year would be around Rs 195 trillion, lower than the current market capitalisation of the companies listed on BSE.
BSE market capitalisation has risen by nearly 75 percent since March 2020.
While the m-cap to GDP ratio is more than 100 percent for developed markets, including the US, the UK, Japan, France and Switzerland, it is less than 100 percent for others Germany, China, Brazil and Russia.
Meanwhile, analysts believe that a ratio of 100 percent and more is a sign of caution for equity investors. "Unlike developed markets, only a minor portion of the country's GDP is represented on the bourses. The combined revenues of all listed companies is less than 50 percent of GDP whereas it is close to 100 percent in developed markets," said UR Bhat, director Dalton Capital.