Over a period of last 15 years the Indian Equity Indices have gradually moved away from representing the Indian GDP.
Consider these facts
- Financial Services accounts for 39% of the Nifty’s weight, up from 20% in 1995.
- As per FY19 Gross Value Added (GVA) data provided by the Government of India, ‘Financial Services, Real Estate & Professional Services’ is 21% of the Indian economy i.e. Financial Services seems to be significantly over represented in the Nifty.
- Auto + Media + Telecom form 8% of the Nifty’s weight, down from 12% in 1995.
- As per FY19 GVA data, ‘Trade, hotels, transport, communication and services related to broadcasting’ is 19% of the Indian economy i.e. Auto seems to be significantly under represented in the Nifty.
- Construction accounts for 4% of the Nifty’s weight.
- As per FY19 GVA data, ‘Construction’ is 7.5% of the Indian economy i.e. Construction seems to be under represented in the Nifty.
Consider some more facts
India is home to 24 Unicorn Start-ups ( i.e. having a valuation of more than USD 1 billion).
How many of these Unicorns find a representation in the Indian Stock Markets - very few; probably 1-3.
Contrast this with the US stock markets which are dominated by Tech companies - many of which are the biggest companies in the world and are start-ups.
So the changing landscape of the Indian economy - the startup boom - has been completely missed by the Indian Stock Markets.
No wonder then the equity markets don't seem to be representing the mood in India - neither the euphoria of the start-ups nor the gloom and doom of the old Indian economy.
