Proportion of Leading 50 Stocks to Total Market Capitalization Reaches Historic Low: Report

Mumbai, Dec 12 (NationPress) The proportion of the leading 50 stocks within the total market capitalization has fallen to a historic low, as detailed in a report released on Thursday.

The latest edition of the DSP Netra report noted, “Large-cap stocks have now shrunk to their smallest share of the overall market capitalization. The share of the top 50 or top 10 stocks compared to the total market has reached an unprecedented low, creating a unique opportunity for investors.”

“While large-cap stocks remain relatively appealing on a comparative basis, the current market scenario emphasizes the necessity for caution in the face of volatility. This environment necessitates a conservative approach to large-cap investing, providing a strategic edge for long-term investors amidst unpredictable conditions,” the report indicated.

According to the report, “India’s long-term market outperformance is frequently linked to factors like domestic investment flows or strong GDP growth, but the true engine driving this is its exceptional returns on equity (ROE). Approximately one-third of Indian firms have consistently posted an ROE exceeding 20 percent, which is second only to the United States in this aspect.”

The report elaborated, “A significant contributor to the outperformance of Indian markets is the steady growth in the book value of the underlying companies. Indian firms have showcased remarkable stability and consistent growth over time.”

The report emphasizes that in the long run, over three-fourths of companies have experienced positive growth in their book value. Notably, over the past two decades, 7 out of 39 companies that have shown positive growth in book value have sustained this growth over all 20 years, even in the face of global challenges such as the GFC and the COVID-19 pandemic, illustrating the resilience of these businesses.

Sahil Kapoor, Head of Products & Market Strategist at DSP Mutual Fund stated, “India's robust fundamentals and superior returns on equity underscore the potential for long-term growth. As we navigate these uncertain waters, adopting a conservative approach to large-cap investing could yield a strategic advantage.”