Rs 1-trillion market capitalisation club sees 69% increase in 2021

Zomato, Nykaa, Adani Enterprises, Dabur among 20 firms to join the list

The number of companies with a market capitalisation of Rs 1 trillion or more rose to 49 in 2021 from 29 in the previous year, an increase of 69 per cent.

Companies that entered the club in 2021 include Adani Enterprises, Dabur, Godrej Consumer, and JSW Steel. Zomato, which got listed last year, has also found a place in the trillion club. Another newly listed company, FSN E-Commerce, which runs Nykaa, was also part of the trillion club but exited it in the last week of 2021.

All the firms in the trillion club in 2019 managed to retain their position last year.
Market experts said the expansion in the trillion club was a natural consequence of the gains in equity markets last year, when the benchmark S&P BSE Sensex gained 22 per cent.

Renewed optimism about the domestic economic outlook following an improvement in high-frequency indicators, enthusiastic participation by domestic institutional and retail investors, and monetary easing by central banks of developed countries propelled gains in equities last year.

Participation of public sector undertakings in the Rs 1-trillion club has strengthened with the re-entry of NTPC and IOCL and the entry of Power Grid Corporation.

Analysts said the entry of PSU majors in the trillion club is the result of investors looking for value in beaten-down stocks. In 2020, the BSE PSU index had declined 17 per cent.

“Finding valuation comfort was getting difficult last year, and many PSUs offered that,” said G Chokkalingam, founder of Equinomics.

State Bank of India (SBI) and ONGC, the other PSUs in the club, saw their market capitalisation increase in 2021. SBI’s market cap jumped 67 per cent and ONGC’s 52 per cent. Meanwhile, The BSE PSU index had gained 41 per cent last year.

“We saw a sharp recovery after the pandemic. And PSUs are closely linked to the economy, as they operate in core sectors, and were best positioned to benefit. There was credit growth, non-performing assets (NPAs) improved, and profitability wise PSU banks reported strong numbers,” said Siddhartha Khemka, head of research-retail, Motilal Oswal Financial Services.

Others, though, said the bounce was on account of optimism about divestments.
The Adani group has the maximum number of companies in the trillion club at five, followed by the Tata group (four).

“The market is taking a fancy to new-age digitally-driven companies because of the growth potential they offer,” said Khemka.
TCS, Infosys, Reliance Industries, and Wipro saw a significant rise in their m-cap in absolute terms last year. In 2021, TCS added Rs 3.05 trillion,  Reliance Industries added Rs 3.2 trillion, Infosys Rs 2.6 trillion, and Wipro Rs 1.7 trillion to their m-cap.
“Because of the pandemic, IT companies saved costs and profitability improved. Finally, IT played as a theme in the market,” said Chokkalingam.

Experts feel the trillion club could expand further as more new-age companies are slated to go public this year.