Equity finally evolves, market cap 49 % of GDP

The Indian equity markets are maturing. At Rs 13,77,000 crore ($310 billion), the market cap of India’s equity markets has grown as big...

The Indian equity markets are maturing. At Rs 13,77,000 crore ($310 billion), the market cap of India’s equity markets has grown as big as bank deposits. “This makes India one of the largest equity markets in the developing world. Market cap is as high as 49 per cent of the gross domestic product,” noted the Economic Survey 2003-04.

Add to this the fact that the market for equity derivatives has shown exponential growth — leapfrogging 384 per cent to touch Rs 21,42,521 crore in turnover. However, it says the index derivatives market remains small by world standards.

The survey also says the venture capital industry is coming of age. There were 44 registered VCs who invested Rs 1,415 crore in over 400 companies up to March 31, 2004. This, the survey stresses, could lead to roughly 40 IPOs over the next couple of years.

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All told, the trading intensity in Indian stock markets rose so much that it was ranked No. 3 after Nasdaq and NYSE. As on April 2004, the equity spot market was doing 1.6 million transactions per day and trading volume of Rs 5,048 crore per day. It said the markets remained less volatile in the last two years as compared to S&P 500 Index of the US or the Korean stock index.’The survey was bullish about the prospects of mutual fund industry also. It said overall assets under management by mutual funds shot up from Rs 102,831 crore to Rs 143,688 crore, or 5.1 per cent of GDP.

Calling Indian equity markets as a success story, the survey says private sector mutual funds have increased their market share from 42.9 per cent to 77.6 per cent of assets in the period under review.

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