India equity market
In this series, we’ll briefly overview the Indian equity market. Specifically, we’ll analyze trends in the Indian equity market over the past five years. We’ll consider the following:
- market capitalization
- foreign portfolio investments
- price-to-earnings, or PE, multiples
Like any other major economy, the Indian economy is affected by global political and economic developments. Fiscal 2016 (April 2015 to March 2016) hasn’t been upbeat for Indian markets. The BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange) are the two major stock exchanges in India. The S&P BSE SENSEX, considered a benchmark index, has given a negative return of -3.9% YTD (year-to-date) as of October 15, 2015. Meanwhile, the CNX Nifty, another benchmark index, has given a negative return of -3.4% YTD.
What does the market capitalization trend say?
Let’s look at the market capitalization growth of the two major stock indices. The chart above takes into account the market capitalization for the previous five years, as released by the SEBI (Securities and Exchange Board of India). The SEBI is the capital market regulator in India.
Fiscal 2011, 2012, and 2013 show a consistent downfall in the market capitalization of both the BSE and NSE. Although weak markets globally did have an impact on the Indian markets, the domestic business environment was adverse as well. Issues such as a series of political scams and retrospective taxation also affected the markets.
If we consider the last five years, we see that market capitalization hit its lowest in fiscal 2013. Major information technology (WTI) company Infosys (INFY) gave a negative return of -11% in fiscal 2013. Major companies of the finance sector, however, gave positive returns. ICICI Bank (IBN) gave a return of 18% in fiscal 2013. HDFC Bank (HDB), which is a major Indian private-sector bank, also gave a return of 18% in fiscal 2013. India-based funds such as the Matthews India Fund (MINDX) and the ALPS Kotak India Growth Fund (INDAX) provide exposure to Indian equities.