19 December 2011

Indian Market Flirting with Trillion-Dollar Tag

The Indian stock market faces a high risk of losing its trillion-dollar tag, even as a timely intervention by the Reserve Bank of India helped it hold on to this mark by a whisker last week.

The market size, measured in terms of total valuation of all listed shares, is just hovering over the trillion-dollar mark (54,11,301 crore or $1.026 trillion based on current currency rate of 52.30 per US dollar), but could slip out of this coveted league anytime in the event of any noticeable fall in the rupee value of share prices.
Indian Market Flirting with Trillion-Dollar Tag


Besides India, there are an estimated 13 countries in the trillion-dollar stock market club. These are the US, the UK, Canada, Brazil, Australia, Hong Kong, South Korea, China, Japan, Spain, Germany, Switzerland and France.

Earlier this year, Russia moved out of this league, while the valuation of a pan-regional stock market for the Nordic region in Europe has also slipped below $1 trillion.

The size of the Indian market might also slip below $1 trillion in either of the two possibilities the rupee value again slips back to the 54 level against the dollar, or the Sensex slumps an estimated 350-400 points.

During the previous trading session on December 16, RBI's policy action may have failed in containing the Sensex slide to a two-year low, but its intervention in the rupee movement helped the market retain its trillion-dollar tag for the time being.

The market went into a tailspin on Friday, as the central bank's decision to keep interest rates unchanged did not help the sagging investor sentiment, and the barometer Sensex declined to its lowest level since November 3, 2009.

In the process, the value of the stock market, measured in terms of the collective value of all listed shares, fell to 54,11,301.50 crore ($1.026 trillion).

The Indian market would have lost its trillion-dollar valuation if the rupee had managed to at least hold on to the record sub-54 level it hit on Thursday.

It plunged to a record low of 54.30 against the US dollar on December 15, but an RBI intervention reversed the fall and the Indian currency came back to the near-52 level.

At the record low level, the stock market's size would have been as low as $996.5 billion at the end of Friday's trade.

However, as the rupee returned to the near-52 level and closed at 52.70 against the dollar on Friday, the market valuation managed to hold on to the $1-trillion mark.

There were no high expectations for any rate cut decision from the RBI's policy meeting on Sunday, but the prevailing high-rate regime has significantly hurt the corporate sentiment due to high borrowing costs.