India is expected to close the year with five companies valued over ₹5 trillion each as foreign investors pumped a record $ 18.5 billion in Indian equities in the December quarter, boosting valuations.
Hindustan Unilever Ltd and Infosys Ltd joined the ₹5 trillion market cap clubs this year, joining Reliance Industries Ltd, Tata Consultancy Services Ltd and HDFC Bank Ltd.
Their shares rose in the range of 9-68% over the year.
Billionaire Mukesh Ambani’s Reliance Industries is the most valuable company with a market value of ₹12.64 trillion, followed by Tata Consultancy a ₹10.91 trillion, HDFC Bank a ₹7.69 trillion, Hindustan Unilever a ₹5.63 trillion and Infosys a ₹5.26 trillion.
Indian equities plunged more than 20% in March after the announcement of the national block due to covids; not only did they recover their losses, they also climbed new highs in November and December.
“The pandemic has created enormous opportunities for some companies. It has created huge opportunities for pharmaceutical and chemical companies, for the technology industry, for offshoring and for industries that operate remotely, ”said analysts from HDFC Securities.
There are at least three other companies that are within a short distance of joining the exclusive club if the market rally continues into 2021. They include Housing Development Finance Corp. mortgage lender with a market capitalization of ₹4.44 trillion, Kotak Mahindra Bank with a market value of ₹3.88 trillion and ICICI Bank a ₹3.54 trillion.
Some relatively smaller companies also increased their market capitalization during the bull run. For example, Asian Paints’ market cap gained 48% this year ₹2.54 trillion and is now getting closer to the cigarette maker ITC Ltd ₹2.56 trillion in market value.
“I think Asian Paints’ increase in market cap is the most surprising in the large cap industry. Asian Paints is trading at FY22 with profits at 72 times, while ITC is at 17 times. Asian Paints should see ₹3,500 crore of profit, while ITC is likely to provide ₹16,000 crore in FY22. Asian Paints now sells at premium with Hindustan Unilever and Page Industries, “broker Motilal Oswal Financial Services Ltd. told clients in a note to clients.
The surge in equity markets has also helped some of the major public sector stocks such as NTPC Ltd and Oil and Natural Gas Corp. regain ₹1 trillion brands with market capitalization.
However, the rise in valuations made analysts cautious. “Valuations aren’t cheap anymore. However, our view remains constructive on equities as an asset class. India is likely at the height of a new business cycle, which would mean strong corporate earnings growth and further improvement in earnings estimates. As a result, we remain constructive on equities as an asset class and view any decline as a buying opportunity, ”said BNP Paribas’ Sharekhan.
“In addition, there is likely to be strong liquidity support for Indian equity markets. Internally, most investors are still sitting on the fence or have recently created some liquidity in their portfolios, “he added.