Best Value For Your Money from RamaKrishnaVadlamudi: market capitalisation

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Monday, 1 January 2024

BSE Broad and Sector Indices Returns 31Dec2023 - vrk100 - 01Jan2024

BSE Broad and Sector Indices Returns 31Dec2023

(This is for information purposes only. This should not be construed as a recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)

This is an update of an earlier blog published on 30Dec2022. The data here show how the broad and sector indices of BSE Limited have performed on an annual and trailing basis as at the end of 29Dec2023 (which is the last trading day of 2023).

(write-up continues below)

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Related blogs:

BSE Broad and Sector Indices Returns 31Dec2022

BSE Broad and Sector Indices Returns 31Mar2022

BSE Broad and Sector Indices Returns 31Dec2021

BSE Broad and Sectoral Indices Market cap 31Dec2023

BSE Broad and Sector Indices Market Cap 31Dec2022

BSE Broad and Sector Indices Market Cap 31Dec2021

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Table 1: Trailing Returns - BSE Indices - year-to-date (YTD) to 10-year returns 31Dec2023 >

Please click on the table for a better view >

BSE Sensex has delivered a decent return of 18.7 percent in calendar year 2023, as shown in table 1 above. The first and third quarter were subdued for Sensex, but the second and fourth quarter of 2023 delivered better returns pulling up overall returns for the year.

But Sensex's returns are pale compared to mind-boggling returns delivered by BSE Midcap and BSE Smallcap indices, with returns of 45.5 and 47.5 percent respectively in 2023.

On a 5-year and 10-year trailing returns basis, BSE Smallcap index has provided the highest returns among broad indices, followed by BSE Midcap index.

As highlighted in this blog, Sensex has become less relevant, in recent years, for investors for generating portfolio alpha and they have been flocking to mid- and small-cap stocks with increased ferocity.

Among the sector indices, BSE Reality index with a return of 79.5 percent has provided the highest returns in 2023, followed by BSE capital goods (66.9 percent), BSE PSU index (55.3 percent), BSE Auto (46 percent) and BSE IPO index (41.4 percent).

On a 5-year and 10-year trailing returns basis, BSE Capital Goods and BSE Realty indices have provided the best returns, followed by BSE IPO and BSE Info Tech indices.

At the start of 2023, nobody could have guessed capital goods and real estate stocks would provide the best returns on a 5-year and 10-year basis. These stocks were laggards for several years till end of 2022, but bounced back strongly in 2023 (one could check the annual returns -- which provide a better sense of cyclical nature of assets -- of them in table 2 below).

Table 2: Annual Returns - BSE Indices - 2014 to 2023 - as on 31Dec2023 >

Please click on the table for a better view >

Calendar year / annual returns provide a better sense of how stock markets and indices move from one year to the next. The cyclical-cum-uncertain nature of asset markets can be gleaned from glancing at the annual returns.

As shown in table 2 above, years 2014, 2017, 2019, 2020, 2021 and 2023 were good for Indian stocks; while years 2015, 2016, 2018 and 2022 provide nil to tepid returns to investors.

The trick of making decent money in markets is to stay invested for longer time horizons, so that one's portfolio of stocks can withstand the market volatility better.

Tables 3 and 4: BSE AllCap and BSE 500 Indices and their sector representation >

Indian equity indices, for long, have been suffering from concentration risk, which has been highlighted several times in these blog posts previously. Indian indices are dominated by Finance, Information Technology and FMCG (fast moving consumer goods) stocks as shown in tables 3 and 4 above.

These top three sectors account for almost 48 percent (or about half) of the total in both BSE Allcap and BSE 500 indices. The concentration of top 10 and 15 sectors also can be seen in the above tables.

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Additional screenshots from Value Research (data as on 31Dec2023)

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Read more:

Blog of Blogs Theme-wise

BSE Broad and Sectoral Indices Market cap 31Dec2023

Global Bond Yields Fall Sharply

Global market data 31Dec2023

India Per Capita Income in Dollars

RBI Annual Report and HBIE - Data Tables

India Foreign Exchanges Reserves Comfortable

Analysis of Small Savings Schemes and Interest Rates

Is De-Dollarization Real?

India Debuts 50-year Sovereign Bond

India: Prospects and Challenges

India Public Debt and Floating Rate Bonds

India Equity ETFs Worth Considering

JP Morgan Guide to Markets Sep2023

Mutual Fund Asset Class Returns 30Sep2023

Buyback Offers and Weblinks

Negative Impact of Debt Mutual Fund Tax Changes

Weblinks and Investing

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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.

CFA Charter credentials - CFA Member Profile

CFA Badge

He blogs at:

https://ramakrishnavadlamudi.blogspot.com/

https://www.scribd.com/vrk100

X (Twitter) @vrk100

BSE Broad and Sector Indices Market Cap 31Dec2023 - vrk100 - 01Jan2024

BSE Broad and Sector Indices Market Cap 31Dec2023

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This is an update of my earlier blog published on 31Dec2022. The following tables show how the market capitalisations of broad and sector indices of BSE Limited have performed during the past one year, that is, between end-December 2022 and end-December 2023.

(write-up continues below)

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Related blogs:

BSE Broad and Sector Indices Market Cap 31Dec2022

BSE Broad and Sector Indices Market Cap 31Mar2022

BSE Broad and Sector Indices Market Cap 31Dec2021

BSE Broad and Sector Indices Returns 31Dec2022

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Table 1: BSE Broad and Sector Indices' Market Cap as on 31Dec2023 - index representation - Index valuation measures (P/E, P/B ratios and dividend yield) >

Please click on the table for a better view >

As shown in above table, market capitalisation of all BSE companies as on 31Dec2023 is Rs 364.29 lakh crore. BSE stock exchange is formerly known as Bombay Stock Exchange -- it's now officially known as just BSE Limited. As on 31Dec2023, number of companies that are listed on BSE is 4,757.

The market cap of BSE 500 index represents 90.1 percent of total BSE market cap and BSE AllCap index represents 96 percent of total BSE market cap. Of the sectoral indices, BSE Financial Services index (in 2022, BSE Finance index was renamed as BSE Financial Services) is the biggest by market cap with a market cap of Rs 82.09 lakh crore, representing 22.5 percent of total BSE market cap.

BSE Financial Services index is followed by BSE Consumer Discretionary, BSE Teck, BSE Info Tech and BSE Commodities indices (BSE Basic Materials was renamed as BSE Commodities in 2022) indices.

You can also find the number of stocks each index contains in the table 1 shown above. For example, BSE AllCap index has 1,170 stocks as on 31Dec2023.

The valuation ratios of Indian stocks continue to be high. The price-to-earnings or P/E ratio of Sensex is 25.6; its price-to-book-value P/B ratio is 3.7; and its dividend yield is just 1.10 percent. As shown in table 1 above, BSE Midcap and BSE Smallcap indices have valuation ratios higher than that of Sensex and BSE 500 indices.

Among the sectoral indices, BSE Capital goods (not shown in table 1 above) -- with a PE ratio of 47.5, PB ratio of 7.4 and dividend yield of 0.59 percent -- is the most richly valued index. Other sectoral indices with rich valuations are: BSE consumer discretionary, BSE FMCG, BSE industrials and BSE healthcare.

Table 2: BSE Broad and Sector Market caps - market cap change - Change during the past one year, that is, between end-Dec2022 and end-Dec2023 >

Please click on the table for a better view >

Broad Indices

The biggest positive surprise of calendar year 2023 is the spectacular rise of small- and mid-cap stocks in India. During 2023, the market cap of BSE Smallcap index grew by a staggering 46.3 percent, from Rs 44.30 lakh crore to Rs 64.82 lakh crore (see table 2 above).

BSE Smallcap index's share to total BSE market cap of all listed companies used to be 15.7 percent one year ago, which grew to 17.8 percent now.

The market cap of BSE Midcap index rose by 38.4 percent in 2023, growing from Rs 43.28 lakh crore to Rs 59.91 lakh crore.

The euphoria in small- and mid-cap stocks can be gauged from the fact that Sensex's market cap rose by just 18.2 percent, versus 46.3 percent for Smallcap and 38.4 percent for Midcap index in 2023.

One more interesting fact is: in 2023, the absolute growth in Sensex market cap, at Rs 21.77 lakh crore, is lower than that of the combined growth of Rs 37.15 lakh crore in market caps of BSE Midcap and Smallcap indices.

BSE Sensex's share (in total BSE market cap) itself fell from 42.5 percent as on 31Dec2022 to 38.9 percent as on 31Dec2023 (see table 4 below).

The absolute growth in market cap of all BSE listed companies, numbering 4,757, is a humongous Rs 81.91 lakh crore, indicating a rise of 29 percent in 2023. The increase in market cap is a combination of rising Indian stocks, as well as the addition of newly listed stocks in BSE.

Sectoral Indices

Of the sectoral indices, the biggest growth in market cap is in BSE Industrials index, with a growth of 75.5 percent in 2023. It is followed by BSE Capital Goods index (not shown in table 2 above) with 72.5 percent rise, BSE Healthcare with 46.6 percent rise and BSE Auto with 44.2 percent growth.

BSE Industrials and BSE Capital Goods indices have common stocks, like, Larsen & Toubro, Hindustan Aeronautics Ltd, Siemens, Bharat Electronics, ABB, Polycab India and BHEL. BSE Industrials also has stocks in automobile sector, like, Ashok Leyland and Escorts Kubota.

Table 3: BSE Broad and Sector Market caps - Change in Valuation Ratios - Change in valuation ratios over the past three years

Please click on the table for a better view >

As shown in table 3 above, PE ratio and PB ratio of Sensex at the end of 2023 are higher compared to end-2022. And dividend yield is lower. But surprisingly, as per data from BSE, the current valuation of Sensex is lower compared to data at the end of 2021.

For example, Sensex's PE ratio as on 31Dec2023 is 25.6 versus 27.9 as on 31Dec2021.

And the same is case with BSE Midcap and Smallcap indices - their current PE and PB ratios are lower compared to numbers as on 31Dec2021. It is obvious the stocks that are part of these indices have improved their earnings over the past two years, resulting in lower valuation ratios for these indices (Or, is there any change in the methodology of these ratios by BSE recently? I'm not sure about that, readers may chip in with their comments).

Based on the PE ratios, valuations have come down drastically for BSE Financial Services and BSE Info Tech indices in the past two years. Tepid earnings for FMCG in the past two or three quarters made BSE FMCG index look more expensive compared to December 2021.

Table 4: How Sensex is becoming less relevant compared to BSE Midcap and Smallcap indices -

The following table is quite a revelation for investors >

The market cap of Sensex used to represent almost 50 percent of the total market cap of all BSE listed companies back in December 2020. One could see its share has progressively come down to 38.9 percent now.

At the same time, the share of BSE Midcap and Smallcap indices has gone up significantly in the same period. You can check those figures with this weblink and that weblink.

Summary

Financial markets in general and equity markets in particular are driven more by future expectations rather than past earnings / fundamentals or past macro indicators.

While it is difficult to forecast the future trajectory of Indian stocks, the current trends and momentum indicate that investors may continue to enjoy decent returns during the first quarter of the new year 2024.

India VIX is currently at 14.50, which is low by historical trends. The volatility index is a measure of market's expectations of volatility in near term and is based on the Nifty Index option prices.

Even CBOE VIX (volatility index) is also low at 12.50. It tracks the 30-day expected volatility of the US stock market. Both India VIX and CBOE are at lows.

Markets by nature are volatile and uncertain, as such it's better for investors to prepare themselves for enhanced volatility.

The fourth quarter results season for Indian stocks will start in less than two weeks time. Investors may be better off watching the quarterly results more closely than usual and brace themselves for market volatility.

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Notes:

Market capitalisation or market cap is nothing but the market value of a listed company calculated by multiplying its current share price and the company's total number of fully paid-up equity shares outstanding on a particular date.

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Read more:

Blog of Blogs Theme-wise

Global Bond Yields Fall Sharply

Global market data 31Dec2023

India Per Capita Income in Dollars

RBI Annual Report and HBIE - Data Tables

India Foreign Exchanges Reserves Comfortable

Analysis of Small Savings Schemes and Interest Rates

Is De-Dollarization Real?

India Debuts 50-year Sovereign Bond

India: Prospects and Challenges

India Public Debt and Floating Rate Bonds

India Equity ETFs Worth Considering

JP Morgan Guide to Markets Sep2023

Mutual Fund Asset Class Returns 30Sep2023

Buyback Offers and Weblinks

Negative Impact of Debt Mutual Fund Tax Changes

Weblinks and Investing

-------------------

Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

CFA Charter credentials - CFA Member Profile

CFA Badge

He blogs at:

https://ramakrishnavadlamudi.blogspot.com/

https://www.scribd.com/vrk100

X (Twitter) @vrk100