Indian Stock Market witnessed history as Indian market capitalization or M-Cap crossed $2 Trillion figure. The report was published by Bloomberg data recently. By crossing the $2 Trillion barrier, Indian stock market became the 9th largest market in the world and second largest after China in terms of emerging market. The strategists believe that more has to come in future.
What is Market Capitalization (M-Cap)?
Market Capitalization or M-Cap is calculated by the formula of MC=N*P where MC is Market Capitalization, N is Number of Shares outstanding and P is the rate of share at the time of closing of market. India’s M-Cap crossed $2B as the country has seen huge investment in the Indian Market in the recent times.
M-Cap to GDP Ratio Comparison
The analysts equate the market with a ten year average which is calculated on M-Cap-to-GDP ratio. India presently has the ratio of 0.88 and it needs to cross 1.1 to make its market expensive.
Countries that are known to be developed have this ratio above 1.0. The M-cap- GDP ratio for emerging markets it between 0.2-0.8 where India is doing quite well. This ratio changes to 0.5-2.2 for developed markets. Countries like United States, Hong Kong, Japan and United Kingdom are known to be developed markets as their M-Cap-GDP ratio is above 1.1 while China and India are considered emerging markets with the ratio less than 1.1.
The Indian stock market seems to be doing well since few years. It is astonishing to see that 50% of the companies in the market have less than 500 crores of M-cap. Future predictions are also in the favor of India as analysts predict that India will see major surge in its market and India will have $8 Trillion GDP by 2030.
Future of Indian Stock Market
It will take few more years when India will have 1.1+ M-Cap to GDP ratio. Presently, India contributes 2.9% to the world GDP that has surged from 2.4% back 2013. With the able and strong leadership, India can expect much better results as the present government has been taking major leap in reforms that can bear unexpected results contrary to what is predicted by the analysts.