Trade challenges persist due to weak global demand, but a narrowing trade deficit offers some relief. While foreign investor outflows pose risks, robust domestic investment provides resilience. The RBI’s proactive policies have played a crucial role in stabilizing liquidity and inflation expectations. Overall, India’s economy is well-positioned for growth, but uncertainties in global markets, financial volatility, and trade disruptions remain key risks. Sustained policy support and domestic resilience will be essential in maintaining economic momentum.

The above chart captures the market cap / GDP ratio of the world markets for 42 years from 1975 to 2017. As can be seen from the above chart, the two peaks when the Market Cap / GDP ratio crossed the 100% mark represent the two massive peaks of 1999 and 2007. In 2017, the markets have once neared the 100 mark, and the only two occasions when the Market Cap / GDP ratio crossed 100 resulted in massive wealth destruction. Based on the newly introduced total market cap over GDP plus Total Assets of Central Bank ratio, the Stock Market is Modestly Overvalued. In the fiscal year 2023, market capitalization to GDP ratio for both National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE) was over 94 percent. On the other hand, Abhishek Basumallick, Chief Equity Advisor, Intelsense Capital said, “Market cap to GDP is a metric which needs to be observed over longer timeframes.

Sector & Industry Performance

India’s overall weight has risen within the MSCI Emerging Market Index. This has openly been a winner against its heavyweight neighbour, China. If this is placed within the context of the Indian economy’s recovery with regard to growth, the sentiment of the stock markets can be fully justified. However, with this positive scenario, India’s GDP has already been forecasted as low. Does it indicate that the markets have not been able to catch up with the reality of the economy that is of growth slowing down?

Over the last few quarters, the use of technology has vastly improved data collection and analysis techniques. That means that the underreporting of revenues to save taxes will gradually reduce, and that will give a more realistic picture of the GDP. The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investors must therefore exercise due caution while investing or trading in stocks.

Market capitalization of listed domestic companies (% of GDP) – India

• The BSE listed stocks hit the trillion mark for the first time in May 2007, doubling n over a decade to $2 trillion in July 2017, and then reaching the $3 trillion mark in May 2021.
• The Predicted Return line indicates the expected, or predicted annualized return for the next eight years if the current TMC / GDP ratio reverts to its recent 10 years mean of 100.48%.
• That means that the sales numbers across sectors should pull up, which will be a major positive for the GDP number.
• This was true for India too in the 1990s as India came out of the antiquated Capital Controller of Issues days to the SEBI era of free pricing of IPOs.
• On the other hand, Abhishek Basumallick, Chief Equity Advisor, Intelsense Capital said, “Market cap to GDP is a metric which needs to be observed over longer timeframes.
• When we studied the top 30 companies by market capitalisation which got listed over the last 20 years, we found that the addition of market capitalisation due to new listings, is fairly steady over the last 2 decades.

The argument made against Market Cap to GDP (MGDP) is that as more companies list every year the market cap increases but the GDP remains on its usual trend. In Saudi Arabia for instance, the listing of Aramco led to a huge boost in the MGDP without any impact on overall market valuation. This was true for India too in the 1990s as India came out of the antiquated Capital Controller of Issues days to the SEBI era of free pricing of IPOs.

However, if the market capitalisation added by newly listed companies is steady over time, then the bias of new additions would be in built into the MGDP ratio and the ratio can be used as a metric to understand market valuations. When we studied the top 30 companies by market capitalisation which got listed over the last 20 years, we found that the addition of market capitalisation due to new listings, is fairly steady over the last 2 decades. Hence, the MGDP ratio should be able to give us a rough idea of where market valuations stand. At certain times, they have plainly shown defiance at the pessimistic attitude of the international markets.

Predicted and Actual Returns

That will mean that the GDP will continue to grow even as the market cap consolidates around these levels for the current market cap to GDP ratio of India today. This analysis excludes smaller economies and markets such as Hong Kong, Taiwan, and Saudi Arabia, where the ratio could be distorted owing to the listing of large global companies. One of the key drivers of GDP growth is corporate profits, and the IIP numbers do indicate that the capital cycle is showing green-shoots of turning around.

That means that the sales numbers across sectors should pull up, which will be a major positive for the GDP number. In comparison, the ratio is relatively low emerging markets with the exception of India. It is followed by Japan with a market capitalisation of $6.5 trillion currently against a GDP of $4.1 trillion. The ratio in India is closer to that in developed markets of North America and Western Europe rather than in emerging economies such as China, Mexico, and Brazil. India’s market cap to GDP ratio remains one of the highest among the major economies.

• India’s market cap to GDP ratio remains one of the highest among the major economies.
• The journey began back in May 2007 when BSE-listed stocks hit the trillion mark for the first time.
• Hence, the MGDP ratio should be able to give us a rough idea of where market valuations stand.
• Search Stocks Industry-wise, Export Data For Offline Analysis, Customizable Filters.
• Overall, India’s economy is well-positioned for growth, but uncertainties in global markets, financial volatility, and trade disruptions remain key risks.

Key takeaways from the market cap / GDP chart of India

The current ratio is slightly lower than the all-time high ratio of 154 per cent at the end of September this year. Iv.The combined mcap of Sensex companies increased from Rs 115.9 trillion (at the end of March 2023) to Rs 147.4 trillion (on 21st May, 2024). India Market Capitalization accounted for 133.5 % of its Nominal GDP in Dec 2024, compared with a percentage of 120.9 % in the previous year See the table below for more data. The ratio is even lower in Mexico at 19.8 per cent, which is much lower than its 10-year average ratio of 28 per cent. This is significantly lower than Brazil’s 10-year average ratio of 42 per cent. Editorji is a popular short video news and information platform based in India.

India’s Market Cap to GDP Ratio Reaches 15-Year High

Indian markets have been doing well and additionally we have seen a number of companies list through IPOs increasing the listed market cap. Ii.The total mcap of BSE listed companies had reached USD 4 trillion in November 2023 and within 6 months surpassed USD 5 trillion. After growing its GDP at above 7-8%, the growth has slowed to just above 6%.

India’s market cap-to-GDP ratio is at an all-time high, second only to the US. Should you be worried?

It was founded in 2018 by Vikram Chandra, one of India’s leading journalists, and has risen to prominence in the digital news space in a relatively short span of time. The platform is primarily designed for mobile devices, with applications available for Android and iOS. V.The combined mcap of National Stock Exchange Nifty50 increased to 33.2%, from Rs 136.5trillion (at the end of March 2023) to Rs 181.8 trillion (on 21st May, 2024). Best stock discovery tool with +130 filters, built for fundamental analysis. Search Stocks Industry-wise, Export Data For Offline Analysis, Customizable Filters. In General, if the indicator is above 100 percent, it is considered slightly overvalued, the indicator being at 100 percent is considered Fairly Valued, and if the Indicator is below 100 percent, it is considered undervalued.

Stocks such as IndusInd Bank, Federal Bank, Shriram Finance, SBI Life, Maruti Suzuki, Ashok Leyland, GSPL, Ambuja Cements, Triveni Turbine and Blue Star are among the top stock ideas for 2024. Interestingly, the year 2017 saw the market cap / GDP ratio of India crossing the 100% mark after a gap of almost 10 years. Firstly, there is room for caution, and that is evident from the way markets have corrected from higher levels. Secondly, we also need to understand that the combination of GST and demonetization has been instrumental in bringing more of Indian business into the mainstream, and that is gradually reflected in the market cap / GDP ratio.

The ratio for other major markets like the US, Japan and China stands at around 155 per cent, 103 per cent, and 81 per cent, respectively. Interestingly, the Indian stock market bottomed roughly at the same MGDP in 2020 as it did in March 2009 after the Global Financial Crisis. The 20-year median for the ratio is 83% and its current value is 135%, suggesting that market valuations are perhaps on the higher side compared to 20-year history. To that extent, the numerator and the denominator are not entirely comparable. Thirdly, the success and applicability of the Market cap to GDP ratio is higher when the market cap reflects a much larger share of economic activity in the country.

The Actual Return line indicates the actual, annualized return of the India stock market over eight years. We can see the calculations largely predicted the trend in the stock market as the actual return line is closely parallel to the two predicted return lines. We can compute the predicted and actual returns of the India stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. Analysts attribute the high ratio to rich equity market cap to gdp ratio india valuations compared to other emerging markets.

The US leads with a market cap of almost $55.65 trillion, followed by China ($9.4 trillion), Japan ($6.42 trillion), and Hong Kong ($5.47 trillion). A standard metric of measuring whether markets overall are underpriced or overpriced is to look at the Market cap to GDP ratio. The first concept to clear is the meaning of GDP, or gross domestic product. It is also a good idea to compare the GDP to the market cap and note how both concepts differ, yet may relate to each other in significant ways, in tune with the economy of any country. Another thing to note is the market cap to GDP ratio in India today. All this will automatically be clarified when the concepts are made more meaningful.

In Brazil, all listed companies have a combined market cap of $676 billion against the country’s annual GDP of $2,245 billion, giving it a ratio of 30.1 per cent. In an era marked by escalating global trade tensions and persistent geopolitical uncertainties, the Indian economy has demonstrated remarkable resilience and robust growth. The above findings are from Reserve Bank of India’s March 2025 bulletin which highlights the state of the economy in the country. The latest data-driven analysis underscores the strength of domestic fundamentals amidst a volatile global backdrop. While global economic uncertainties persist, India’s economy shows strong growth, supported by robust consumption and government spending.