The records are breaking. With record inflows pouring into the Indian stock markets from foreign and domestic investors, large Indian companies are having a dream run clocking huge market cap gains in 2019.
India’s largest conglomerate Reliance Industries Ltd added a whopping Rs 2.49 trillion in market capitalization in 2019. This is by far the highest addition in market cap by any single company in a given year.
The last time a company added such a high market capitalization was back in 2017 when Reliance Industries topped the list adding Rs 2.3 trillion to its market capitalization.
In 2019, it was Tata Consultancy Services stock that took the honours with an addition of about Rs 1 trillion to its market capitalization.
In fact, Reliance Industries Ltd added nearly Rs 4 trillion to its shareholders’ wealth in the last two calendar years.
Sentiment in the Indian stock market took a turn for the better after the government announced a tax cut for Indian companies. That saw Indian stocks end the year 2019, adding about Rs 12 trillion in market capitalization.
“The performance of the large-cap. indices was helped by a strong performance of a few large-cap. stocks and earnings upgrades for most stocks post the corporate tax cut announcement on September 20, 2019. Incidentally, the Nifty-50 Index was at similar levels on December 31, 2018 (10,863) and September 19, 2019 (10,705), which would imply that the market’s entire return for CY2019 has come after September 19, 2019,” said Kotak Institutional Securities Ltd in a note to clients.
By contrast, in 2018, India’s total market capitalization fell by Rs 6.28 trillion as selling in a large number of stocks, particularly mid- and small-cap stocks took its toll on shareholders’ wealth.
However, the sentiment this year had not been as buoyant as it was in 2017 when Indian stock markets added a whopping Rs 46 trillion in market cap.
Still, the Indian markets owes much of the gains this year to low-interest rates across the globe which drove investors to equities. Globally, the MSCI world index also ended at record highs as global stock market capitalization zoomed past $ 87 trillion, increasing by 24.90%.
However, the bulk of India’s stock market gains is coming from a fewer number of companies. In 2019, the top 13 market cap gainers account for all gains in the stock market.
Some of the other top gainers after Reliance Industries include stocks like HDFC Bank, which gained Rs 1.2 trillion, while ICICI Bank Ltd ( Rs 1.2 trillion), Bharti Airtel Ltd ( Rs 1.1 trillion), Tata Consultancy Services Ltd ( Rs 1.08 trillion) and Bajaj Finance Ltd ( Rs 1.2 trillion) added substantially to their investor’s kitty.
“The strong performance of banks, diversified financials and insurance reflects (1) re-rating of multiples of the beaten-down banks on peaking of NPLs, decline in slippages and loan-loss provisions and continued strong performance of the ‘retail’ banks,” noted Kotak’s report.
