Market cap of BSE-listed firms hit $3 trillion mark; small mid-caps lead the charge

Market Outlook

The market capitalisation of BSE-listed firms hit $ 3 trillion on May 21, supported by a rally in the small & midcap space. At close on Friday, the average market capitalisation of BSE-listed firms stood at Rs 218.05 lakh crore or $ 2.99 trillion.

The S&P BSE Sensex is just 4 percent away from hitting a record high of 52,516 recorded in February 2021 while the big action was seen in the small & midcap space.

The S&P BSE Midcap hit a fresh record high of 21,485.75 on Friday while the S&P BSE Smallcap index hit a high of 23,130.40.

The S&P BSE Midcap index rallied by about 20 percent while the S&P BSE Smallcap index gained by about 28 percent so far in 2021.

“Small and midcaps are always big gainers in a bullish market and the biggest losers in a bearish one. The reason is simple — liquidity and market depth,” Keval Bhanushali – CEO at Marwadi Shares and Finance Ltd said in an interview.

“We have hit record trading volumes from retail investors in India, approx. 45% for the first time. This could well be what makes most small and midcap companies remain resilient, including those without core fundamentals. While buyers will always justify buying, it is something that retail investors need to be very cautious about,” he said.

The market cap of BSE listed companies has been rising despite the recent selling by foreign institutional investors (FIIs). However, they have been net buyers on a 12-month basis.

Overseas investors withdrew Rs 4,444 crore from Indian markets so far in May amid concerns over the second wave of the coronavirus pandemic and its possible impact on the Indian economy.

As per depositories data, foreign portfolio investors (FPIs) took out Rs 6,370 crore from equities but pumped in Rs 1,926 crore in the debt segment between May 1-21. This took the total net outflow to Rs 4,444 crore.

“While FPIs turned net sellers only last month, India held on to its position as the most preferred emerging investment destination since April 2019, barring a few months. In the past 12 months, it has garnered the highest FPI equity inflows of over Rs 36,618 crore (as of April 30),” Nirali Shah, Head of Equity Research, Samco Securities said.

“Brazil ranks second with around Rs. 10,811 crore, as per CLSA data while other EMs such as Indonesia, Taiwan, Thailand, and South Korea have seen net negative net flows. This data indicates that a few months of FPI outflows could cause short-term corrections in the markets but at the end of the day, Indian markets continue to remain stable at the current moment,” he said.

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