Market cap-to-GDP ratio at a record 132

India's market cap stands at 132 of its GDP - from 23 in 2002,says SMC.

A closer look between the Indian economy and market capitalisation shows that the country8217;s market cap-to-GDP ratio has reached a record level of 132.47 per cent in financial year 2010-11 from 23.28 per cent in 2002-03,says a report.

8220;Thanks to the sustainability of the market during the financial year 2010-11 and mega public issues such as Coal India,the market cap-to-GDP ratio has reached a record level of 132.47 per cent. That is,the market cap of the country today stands at 132 per cent that of the country8217;s GDP,8221; SMC Global Securities said in a report.

Market cap-to-GDP ratio is an indicator of the total listed wealth of a country as a percentage of its GDP.

During FY 2002-03,the market cap-to-GDP ratio in India was as low as 23.28 per cent,representing that the total listed wealth in the domestic capital markets was just 23.28 per cent of the country8217;s GDP.

But,by 2007-08,the ratio moved up to 109.47 per cent,and here for the first time in Indian capital market history,the market cap of the country was more than that of the country8217;s GDP.

8220;The reason for such substantial rise can be attributed to two major factors,first,more and more Indian companies started accessing the capital market through IPOs,secondly,there was a continuous rise in valuations in the capital market; thanks to the bull phase between 2002 and 2003 and between 2007 and 2008,8221; SMC noted.

As more and more companies in a country get listed on the capital market,the percentage tends to move up,it added.

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However,things turned sour after the unprecedented financial crisis and market meltdown during 2008-09,which saw the m-cap-to-GDP ratio crashing to 55.36 per cent,it said.

But,a recovery in the capital market during 2009-10 brought back this ratio to 100.02 per cent and during the financial year 2010-11,the market cap-to-GDP ratio reached 132.47 per cent.

The market cap-to-GDP ratio helps understand whether a country is undervalued or overvalued. A higher ratio indicates that there is a sense of high valuation in the country. The Indian economy is projected to grow by 8 per cent in 2011-12.