Bull run continues! Indian equity markets hit $5 trillion market cap; $1 trillion wealth added in less than 6 months

The Indian stock market has achieved a remarkable milestone by adding $1 trillion in wealth within six months, propelling it into the esteemed $5 trillion club for the first time. On Tuesday, the total market capitalization of all stocks listed on the Bombay Stock Exchange (BSE) soared to Rs 414.75 lakh crore, despite a significant withdrawal by Foreign Institutional Investors (FIIs) ahead of the Lok Sabha election results on June 4. Investors maintained their buying momentum in the broader market, even as the Nifty and Sensex indices showed uncertainty following a robust performance the previous week.

Dalal Street's journey from a $4 trillion market cap on November 29, 2023, to $5 trillion on May 21, 2024, marks the fastest wealth creation in its history. Although Nifty is currently about 250 points below its all-time high, mid and small-cap indices reached new peaks on Tuesday. This bull market phase is being driven primarily by domestic institutional, retail, and high-net-worth individual (HNI) investors, despite FIIs pulling out at least Rs 28,000 crore this month. Market experts anticipate that the upcoming Lok Sabha poll results in June and the subsequent full-year Budget will be significant triggers for the BSE Sensex and Nifty50. Additionally, analysts believe the prospect of a US Federal Reserve rate cut could further bolster market sentiment.

India now ranks as the fifth-largest stock market globally, behind the United States, China, Japan, and Hong Kong. The country's market capitalization first reached $1 trillion on May 28, 2007, and doubled to $2 trillion a decade later on May 16, 2017. The growth accelerated, hitting $3 trillion on May 24, 2021, and now $5 trillion within three years. Projections suggest that India is on track to become the third-largest economy by 2027, with a market capitalization potentially reaching $10 trillion by 2030, provided market returns remain consistent and new listings continue.

This rapid expansion has made India a prime destination for emerging market investors, offering substantial liquidity for significant players. The market depth has increased significantly, with the number of stocks boasting a market capitalization of $1 billion nearly doubling to 500. Over the past 5, 10, 15, and 20 years, India has consistently delivered annualized returns exceeding 10%, making it a standout among major emerging market economies. According to Jefferies, India's GDP is projected to touch $5 trillion within the next four years, positioning it as the third-largest economy by 2027, overtaking Japan and Germany, driven by favorable demographics, strengthening institutions, and improved governance.

Furthermore, India's weighting in the MSCI Emerging Markets (EM) index is set to rise from 18.3% to around 19% on May 31, potentially attracting approximately $2.5 billion in FII inflows.