Skip to main content

India’s market cap to GDP nears 100%

India’s market cap to GDP nears 100%
Indian stocks are nearing the red zone as the country’s market capitalisation is now almost equal to its gross domestic product (GDP).With the benchmark indices recording new highs, India’s market capitalisation has swelled to Rs 150.7 lakh crore, 95 per centof GDP (on a trailing four-quarter basis). The market cap-to-GDP ratio was just 72 per cent a year ago.
The surge of 23 percentage points is due to exuberance in the equity market despite economic growth slowing.The Indian market cap has risen by Rs 44.44 lakh crore, or 42 per cent, in the past-one year.Besides the sharp share price increase, high equity issuances, particularly initial public offerings (IPOs), have contributed to the increase in market cap this year.
Meanwhile, GDP has managed to rise by only eight per cent during the same period. Domestic GDP in the June quarter had slowed to 5.7 per cent (year-on-year growth) due to demonetisation and the introduction ofthe goods and services tax( GST). It sawa slight revival to 6.3 per cent in the June quarter.
India’s market cap-to-GDP ratio was more than 100 per cent after the 2007 bull run. Stock prices had seen a significant meltdown after that amid the global financial crisis.According to experts, the ratio of more than 100 per cent is considered risky, while a figure of over 120 per cent is considered to be bubble territory.
Some saya high market cap-to-GDP reading may not be cause for concern because a lot of developed markets have been trading atmore than 100 per cent for some time now. Also, economic growth is likely to come backto seven per cent-plus levels in the next fiscal year.
So far, experts have been justifying India’s expensive valuations by pointing atthe low market cap-to-GDP reading. However, if stocks continue to go up and the GDP print remains muted, India will look expensive on this count as well.
The Business Standard, New Delhi, 26th December 2017


Popular posts from this blog

Deposit gush:-CA Institute Bats for Special Audit

Obligation for the Month of May 2017

Obligation for the Month of May 2017 Event DateActApplicable FormObligation6-May-2017Service TaxChallan No.GAR-7E-Payment of Service Tax for April by Cos7-May-2017Income TaxForm No.27C (TCS)Submission of Forms received in Apr  to IT Commissioner7-May-2017Income TaxChallan No.ITNS-281Payment of TDS/TCS deducted/collected in Apr10-May-2017ExciseER-1Return for Non SSI assessees for Apr10-May-2017ExciseER-2Return for EOUs for Apr10-May-2017ExciseER-6Return by units paying duty >  1 crore (CENVAT + PLA) for Apr12-May-2017D-VATBE - 2Advance information for 2nd fortnight of May of functions with booking cost > Rs 1 lakh in Banquet Halls,hotels etc. in Delhi15-May-2017D-VATDVAT-20Deposit of DVAT TDS for  Apr15-May-2017Income TaxForm 27EQTCS Returns by ALL Collectors15-May-2017Providend FundElectronic Challan cum Return (ECR)E-Payment of PF for Apr15-May-2017D-VATDVAT-48 Return of DVAT TDS for quarter ending March21-May-2017ESIESI ChallanPayment of ESI of Apr21-May-2017M-VATMVAT ChallanPa…

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …