India Inc's m-cap nears record

Just 3% lower than the all-time peak seen in Nov 2010; IT and consumption-oriented firms move up the list, with bigger rewards for those combining growth with cost and debt cutting

About three years after its previous high, India’s listed companies are again closed to record levels in terms of market capitalisation.

It is Rs 75.8 lakh crore for the 5,350 companies on the BSE, oldest stock exchange in Asia and the bourse with the highest number of listed companies in India. This is 2.1 per cent off its all-time high, of Rs 77.5 lakh crore in November 2010. India’s current market capitalisation of companies makes it the ninth highest among countries, $1.24 trillion currently, according to Bloomberg data, ahead of Brazil and Russia but behind China. The highest is America, with a total market capitalisation of $22 trillion.

V Balasubramanian, head (equity) and fund manager, IDBI Asset Management, said the three years taken for the market capitalisation to inch closer to previous highs suggests the rally might not be overdone. “I don’t think it is overvalued since we are only now reaching levels we had seen three years ago and also considering we have had some additional public issuances since then, which would have added to the securities available for trading,” he said.

Rajat Rajgarhia, managing director, institutional equities, at Motilal Oswal Securities, said much of the recent surge that took the benchmark indices to record highs had come from a certain segment.

“The market has been polarised. Many of the large companies, whether it is a petroleum major or large public sector bank, are still off their highs. Information technology companies, on the other hand, have risen significantly in the past three years,” he said.

The list of top 19 companies by market capitalisation shows this trend over three years. Technology and consumption-oriented companies have significantly increased their market cap, while the leaders of November 2010 have actually seen their valuations erode.

Tata Consultancy Services is top at Rs 4.3 lakh crore, more than double from Rs 2.1 lakh crore in 2010. ITC has also doubled, from Rs 1.4 lakh crore to Rs 2.8 lakh crore. Reliance Industries was the most valuable company in November 2010, worth Rs 3.6 lakh crore. Its current capitalisation is significantly lower, at Rs 3.09 lakh crore. Oil and Natural Gas Corporation’s has dipped from Rs 2.9 lakh crore to Rs 2.75 lakh crore.

Sandeep Nanda, chief investment officer at Bharti AXA Life Insurance, said there'd been a change in the companies which ran up since the earlier high. “Stocks which have shown earnings, de-leveraged and cut costs were rewarded…instead of all cyclicals going up at the same time. The market has become more discerning,” he said.

A further upside is likely to depend on the outcome of the Lok Sabha elections, say experts. The uptrend is now extending beyond a chosen few.

“The rally is getting more broad-based. Many of the mid-caps have participated in the past two months,” said Rajgarhia.