BSE Market Cap Overtakes Hong Kong, Achieves 4th Spot Globally

The combined market capitalization of all companies listed on the BSE has once again surpassed Hong Kong, making it the fourth-largest equity market in the world.

As of now, the total market capitalization of all BSE-listed companies is $5.18 trillion, slightly higher than Hong Kong's $5.17 trillion, according to Bloomberg data. The United States holds the position of the largest market globally with a market cap of $56.49 trillion, followed by China at $8.84 trillion, and Japan at $6.30 trillion. 

On January 23, Indian markets briefly overtook Hang Seng, but Hong Seng soon reclaimed its fourth position. Since April, the Hang Seng Index in Hong Kong has surged over 12%, entering a bull market with an almost 20% increase from its January low. This recovery comes after years of losses driven by economic concerns in China and geopolitical tensions. The market's revitalization is attributed to a stronger Chinese economy, lower valuations, and increased investments from mainland China. Moreover, China's Rmb300bn ($41bn) fund to support the real estate sector has significantly boosted market sentiment.

Last week, the Indian markets experienced significant volatility following the election results. On June 4, the market dropped by over 6%, but it has since rebounded to hit a record high. The total market capitalization of all companies listed on the BSE surged by over Rs32 lakh crore, reaching a new peak of Rs432 lakh crore ($5.18 trillion).

In its latest note, Prabhudas Lilladher stated that it expects the NDA to concentrate on capex-led growth in sectors such as PLI, roads, ports, aviation, defense, railways, and green energy. This focus will be supported by a 20 basis points reduction in the fiscal deficit for FY24, normal monsoon conditions, and an RBI dividend of Rs 2.1 trillion. However, they also anticipate heightened attention on farmers, rural areas, the urban poor, and the middle class to mitigate the effects of recent social engineering and the distribution of freebies in some states. 

IIFL Securities observed that the BJP's difficulty in securing 240 seats, along with the presence of numerous new significant faces, could undermine majority support. This situation may impede the implementation of fiscally and politically challenging reforms, potentially leading to increased populism and affecting medium-term growth, which currently stands at a satisfactory 6.3% for GVA in Q4.

This is likely to trigger a market correction, initially impacting overpriced sectors such as PSUs and capital goods, but eventually spreading more broadly, potentially resulting in up to a 10% correction as growth estimates adjust. Rather than adopting a fully defensive stance, IIFL Securities recommends focusing on stocks with solid growth prospects, minimal reliance on government actions, and strong valuations, particularly large caps in sectors like auto, consumer goods, banks, and NBFCs. They anticipate near-term underperformance in capital goods, defense, and power sectors, while expecting cement, pharma, and healthcare sectors to perform well.