Goldman Sachs bets on India becoming 5th largest by market cap
One of the world’s most formidable investment banks, Goldman Sachs, is bullish on India. In fact, Goldman sees India in the same sweet spot of growth and value explosion as China a decade ago. As Goldman Sachs highlighted, China created immense wealth for those who believed in the China story and India would be no different. It also predicts that Digital IPOs would lead the way.
Let us look at some numbers. If the BSE market cap at $3.50 trillion looks lofty, Goldman Sachs has loftier predictions. They expect India’s market cap to grow from $3.50 trillion to $5 trillion in the next 3 years. That is a phenomenal 43% appreciation over 3 years. Goldman Sachs expects that by 2024, India would be the fifth largest in the world by market cap after the US, China, Japan and UK.
The big story, according to Goldman is that this capital appreciation will be driven by digital IPOs. Nearly $400 billion of market cap accretion will come from digital IPOs. The successful IPO of Zomato opened the floodgates for a stream of big ticket digital IPOs including Paytm, Ola, Policybazaar and Nykaa; all of which are expected in the current fiscal year.
The big digital push in India has come from 80 crore internet users and 50 crore smart phones who spurred the digital economy backed by solid bandwidth. The pandemic also pushed scores of sectors online. According to Goldman, Zomato IPO proved that Indian retail investors and QIBs have a strong appetite for long-gestation digital stories.
One of the big stock market trends that Goldman foresees is the shift in the composition of the Nifty with many more digital plays included in the index. Today, the Nifty is dominated by banks, financials, oil, IT and automobiles. That could shift largely in favour of digital plays. Goldman also projects India’s share of global market capitalization to increase 90 bps to 3.7% by 2024, although GDP share may go up by just 40 bps.
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