India’s market capitalisation to grow faster than nominal GDP: Kotak Securities

Mumbai: India’s market capitalisation growth will well outpace the country’s nominal gross domestic product (GDP) growth over the next few years, helped by a larger share of companies in the economy and new stock listings, brokerage firm Kotak Securities has said.

The brokerage expects significant contribution from consumer internet, energy, and manufacturing companies to Indian market capitalisation – value of all the listed companies in the country – in the future.

India’s market capitalisation has grown at a compounded annual growth rate (CAGR) of 20% over the past 20 years and 15% CAGR over the past 10 years, but still accounts for only 2.5% of the global market capitalisation.


In May, India’s market capitalisation crossed $3 trillion, making it the eighth largest market globally. India achieved this milestone with consistent buying by domestic and foreign institutional investors despite uncertainty about recovery in earnings owing to the pandemic.

Generally, a country’s market capitalisation will grow along with the growth in the economy and per capita income, which will drive companies’ revenues and profits.

However, according to Kotak Securities, India’s market capitalisation is growing faster than nominal GDP with four key drivers – a larger economy, a more extensive formal economy, a larger share of Indian companies in the economy, and listing of new companies.

“We expect the availability of abundant and cheap capital, increasingly favourable economics of disruptive technologies, and favourable government policies to result in a higher share of Indian companies in sectors such as consumer internet, energy, and manufacturing,” the brokerage said in a note.

It expects the formal sector to grow faster than the overall economy and take market share from the informal sector in several large sectors such as healthcare services, real estate, and retailing.

Kotak also expects listing of unicorns such as Flipkart, Byju’s, Paytm, Oyo Rooms, Ola, Swiggy, and companies including LIC in the coming months to contribute further India’s market capitalisation.