Overtakes Australia following the election rally; market cap could cross $1.5 trillion in 12 months, close to that of Switzerland

The total value of India’s listed companies might well waltz across the $1.5-trillion mark, as well as come close to climbing another step on the top-10 club of countries by market capitalisation if current growth expectations are anything to go by. It overtook Australia to enter the top-10 club, following the recent election rally.

India’s market capitalisation has risen by 25.1 per cent so far in 2014. At $1.42 trillion, Indian companies are now more valuable than Australia’s, whose companies are valued at $1.4 trillion; according to Bloomberg data.

Brokerage estimates suggest a further upside in the days ahead. Citigroup, Deutsche Bank, Bank of America Merrill Lynch and Nomura have suggested upsides of seven to 16 per cent; all targets to be achieved in 12 months or less. An average gain of 11.3 per cent.

This would take India’s market cap to $1.58 trillion within 12 months. This would be within kissing distance of the next in line in the top-10 list, Switzerland, which has a market capitalisation of $1.61 trillion.

UBS Securities India Market Strategy said investors would increasingly look to discount future earnings and growth, paying a premium for this and pushing markets higher, as a result.

“We believe investors will be willing to give a premium for growth hope and also look beyond FY15 earnings estimates. By the end of 2014, investors would start looking at FY16 estimates. Based on our top-down expectation of 15 per cent earnings growth in FY16, and 15x PE, we set our Nifty target for end-2014 at 8,000. There could be an upside to this target based on how policy making evolves over the next few months, which could flow through to earnings estimates and multiples higher than average,” said the report dated May 16 and authored by analysts Gautam Chhaochharia and Sanjena Dadawala.

For more visit: Business Standard

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