Will India's market cap hit $10 trillion by 2030?

Much has been said and written about India's growth in the current decade. Whenever this discussion comes up, the question that comes to our mind is - will India's market cap hit $10 trillion at the end of this decade? If you are interested in the answer, this is the article for you. So, let us get started.

India's current market cap

India's current market capitalization is estimated to be around $4.5 trillion. But what does it even mean? It means that the total combined value of all publicly traded companies listed on Indian stock exchanges is approximately $4.5 trillion. Market capitalization, often abbreviated as "market cap," is calculated by multiplying the current market price of a company's shares by the total number of outstanding shares.

This figure gives an indication of the overall size and value of the stock market in India. A higher market capitalization suggests a larger and more significant stock market, reflecting the collective value of companies traded on the exchanges. Market capitalization is a key metric used by investors, analysts, and policymakers to assess the health and performance of a country's stock market and economy.

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Now that you understand the significance of the market cap, you would be interested in knowing more about India's market cap. In this section, we look at India's global ranking as per market cap, which will give you an idea of where we stand and how far we can go.

Source: Wikipedia

As you can see, the USA leads everyone else in the race, China is second on the list, followed by Japan and India. Hong Kong is fifth on the list. 

Projections for India by 2030

Analysts are bullish on the Indian stock market, projecting significant growth in its market capitalization by 2030. Here is what most analysts expect: 

• $10 trillion: This is a common projection from several sources, including financial institutions like Jefferies and the Pantomath Group. They cite factors like strong economic growth, favorable demographics, and a rising domestic investor base for this growth.
• $8 trillion: Other conservative investors/analysts suggest India's economy could reach $8 trillion by 2030-31, with the market cap potentially mirroring that growth.

Indian equity market: How have they grown?

The Indian equity market has witnessed impressive growth over the past few decades, propelled by a confluence of factors. Here's a breakdown of how it has grown and the reasons behind it:

Growth Trajectory

• Increased Investor Participation: Both domestic and foreign investor participation has risen dramatically. Retail investors in India are actively participating in the market, and Foreign Institutional Investors (FIIs) are attracted by India's growth story.
• Strong Economic Fundamentals: India's GDP has grown steadily, making it one of the world's fastest-growing economies. This economic growth translates to higher corporate profits, which fuels the stock market.
• Market Capitalization: India's market capitalization has grown significantly, currently ranking as the fourth largest globally as discussed  above.   

Here are some reasons why India's equity market has grown well over the decades:

Economic Liberalization: The Indian government's economic reforms since the 1990s have opened the economy to foreign investment and increased competition, leading to a more vibrant corporate sector.

Rise of IT Sector: The Indian IT sector has boomed, becoming a global leader. The success stories of these companies have attracted investor interest in the broader Indian market.

Demographic Dividend: India boasts a young population, a significant advantage in the global workforce. This translates to a growing consumer base and fuels demand for companies listed on the stock exchange.

Government Initiatives: The Indian government has implemented various initiatives to promote the stock market, such as simplifying investment procedures and encouraging digital participation.

Increased Financial Literacy: The overall financial literacy is poor but the good part is that it is rising. The rising financial literacy among the Indian population has led to more informed investment decisions and participation in the equity market.

Reasons for achieving $10 trillion by 2030?

Mostly, we would be somewhere around the $10 trillion mark by 2030. But why is everyone so optimistic about the growth? In this section, we highlight some reasons why we are likely to achieve this number:

Strong Economic Growth: India has a young and growing population, creating a large workforce and a robust domestic market for companies. It translates to increased consumer spending and potential growth for businesses. Also, government initiatives focused on infrastructure development, ease of doing business, and digitalization can create a more business-friendly environment, stimulating economic activity and corporate profits.

Rise of Domestic Investors: As financial literacy increases, more Indians are participating in the stock market, leading to a wider investor base and potentially more capital flowing into the market. Between 2019 and 2023 alone, over 120 million new investors were registered. Also, with economic growth, disposable income levels are expected to rise, allowing more Indians to invest in the stock market.

Foreign Investment: India's growth story and potential for high returns can attract more foreign institutional investors (FIIs), bringing in additional capital to the market. A predictable and transparent regulatory framework can help build investor confidence and encourage long-term investment from foreign entities.

Strong Corporate Performance: A combination of economic growth, rising domestic demand, and a skilled workforce can lead to improved profitability for Indian companies, making them more attractive investments. Government and industry efforts to improve efficiency and productivity can further enhance corporate performance and boost investor confidence.

Stock Market Reforms: Investments in upgrading trading infrastructure and technology can make the Indian stock market more efficient and attractive to investors. Plus, the initiatives to simplify paperwork, streamline regulations, and promote digital investment platforms can make it easier for domestic and foreign investors to participate.

Before you go

Idia's journey towards a $10 trillion market cap by 2030 is both aspirational and challenging. While we possess significant growth potential as discussed above, realizing this target requires sustained efforts to address structural constraints, foster investor confidence, and stimulate market growth. 

As we continue on its path of economic transformation, stakeholders across the public and private sectors must collaborate to unlock the full potential of the Indian economy and capital markets.