Top 50 Stocks' Share in Total Market Cap Hits All-Time Low: Report

Share of the top 50 stocks in the total market capitalisation has hit an all-time low, said a report on Thursday.

The December edition of the DSP Netra report said, "Large-cap stocks are now at their smallest share of total market capitalisation. The share of the top 50 or top 10 stocks relative to the total market has hit an all-time low, presenting a rare opportunity for investors."

"While large caps remain relatively attractive on a comparative basis, the current market environment underscores the need for caution amidst volatility. This backdrop makes a conservative approach to large-cap investing essential, offering a strategic advantage for long-term investors amidst uncertain and unpredictable conditions," the report stated.

India's long-term market outperformance is often attributed to factors like domestic flows or robust GDP growth, but the real driver is its superior returns on equity (ROE). About one-third of Indian companies have consistently achieved an ROE of over 20 per cent, second only to the US in this regard."

According to the report, "One major reason Indian markets are outperforming is that book values of underlying companies have been rising steadily. Indian companies have shown stability and consistent growth over time."

The report highlights that over the long term, more than three-fourths of companies have shown positive growth in their book value. Notably, in the 20 years, 7 out of 39 companies with positive growth in book value have achieved growth in each of those 20 years, even amidst global challenges such as the GFC and the COVID-19 pandemic, showcasing the stability of these businesses.

Sahil Kapoor, Head of Products & Market Strategist, DSP Mutual Fund said, "India's strong fundamentals and superior returns on equity point to long-term growth. In these uncertain waters, a conservative approach to large-cap investing may provide a strategic advantage."