Market capitalisation of Indian stocks touches 91.5 per cent of GDP

Mumbai: A buoyant stock market and sustained investor interest has helped India catch up with developed markets in terms of market capitalisation to GDP ratio.

With the benchmark BSE index peaking to 14,724 points this month, market capitalisation of the country rose to 91.5 per cent of GDP. This compares favourably with mature economies like Japan (96 per cent) and South Korea ( 94.1 per cent). As against this, China's market capitalisation was just 33.3 per cent of GDP at the end of 2006, according to the Economic Survey tabled in the Parliament.

The market value of Indian stocks was second highest among all emerging markets, surpassing those of markets like Thailand, Malaysia, South Korea and Taiwan at the end of 2006.

"Improved investor awareness and expanding equity cult among the small savers appear to augur well for buoyant stock markets," the survey said.

Market cap in terms of GDP indicates the relative size of capital market, besides investor confidence and discounted future earnings of corporate sector.

Financial and regulatory reforms of capital market, together with accelerated economic growth and macroeconomic stability, sustained the investors' confidence in the country's capital market, the survey said.

The expectations of higher corporate investment and earnings, robust GDP growth combined with the economic reforms are expected to make India the preferred destination of foreign institutional investors, the survey added.