India adds entire South Korean stock market size in 12-month stock surge

The phenomenal run of Indian equities added a market cap more than the size of the entire South Korean stock market. In the past 12 months, India’s market cap rose by 40.4% or equivalent to $2.1 trillion, more than the entire market cap of South Korean equities worth $1.9 trillion. In the same period, the global market cap increased by 8.1% or equivalent to $8.9 trillion, which implies India alone contributed 23.59% of the annual global market cap surge.  

In July 2024, the Indian stock market contributed to 4.4% of the global market cap making its all-time high contribution, states the August 2024 Bulls & Bears Report by Motilal Oswal. The historical average (from July 2009 to July 2024), of India’s share in global market cap is 2.7%, but currently, the Indian market has been surpassing its historical average by a huge margin.

India’s market capitalisation to GDP ratio is also reaching a new high and currently stands at 142% (of FY25 estimated nominal GDP), way above the long-term average of 85%. India’s market cap to GDP ratio has been volatile, plummeting to 57% (of FY20 GDP) in March 2020 from 80% in FY19 and then sharply reviving to 132% in FY24.   

Indian equities have been trading at 24.8 times FY25 estimated earnings, making them the priciest equities among the top global markets. The MSCI India Index is trading at a premium of 88% to the MSCI Emerging Market Index, way above its average of 77%.

Currently, India stands as the fourth largest stock market with a market capitalisation of $5.2 trillion. USA, China and Japan are the top 3 stock markets with a market cap of $57 trillion, $8.5 trillion and $6.7 trillion respectively. 

The USA contributes 47.9%, the most, to the global market cap, followed by China which contributes 7.1%, followed by Japan at 5.7%, and then India at 4.4%, which was followed closely by Hong Kong at 4.1%. The other markets in the top 10 rankings are the UK comprising 2.7% of the global market cap, Canada and France both at 2.6%, Saudi Arabia at 2.3%, and Germany at 2%. Together, these top 10 contributors accounted for about 81% of the global market cap, as of July 2024.

Amongst the top 10 contributors, the Indian market registered the highest growth in the year at 40.4%, followed by Taiwan at 25%. The Chinese market slumped the most, by 18%, followed by Brazil which slumped 17%.

The US equities that fetch the second highest premium after India have been trading at 22.7 times FY25 Estimated Earnings. However, the Return on Equity (RoE) for India was 14.8% in FY24 and an estimated 16.2% in FY25. Compared to that, the US equities RoE was 17.9% in CY23 and an estimated 18.6% in CY24. The US equities also reported the highest Return on Equity in a year and are also delivering the highest estimated RoE.

Notable among the markets with low PE and high return on equity are Brazil, UK, and Russia. On the other side of the spectrum are markets with high PEs and comparatively lesser RoEs, like Japan, Taiwan, Korea, and Indonesia. Japan, in particular, is a case in point. Japanese equities had a trailing PE of 30.3 and 22 times CY24 Estimated Earnings with a trailing RoE of 6.7% and 9.2% estimated RoE for CY24.