Rs 1 trn m-cap club hits half-century in 2022 despite muted gains in Sensex

It's a sign of gains in equity markets being lopsided, say analysts

Companies with more than Rs 1 trillion market capitalisation (m-cap) have gone up by five in 2022, notwithstanding the muted gains in the benchmark BSE S&P Sensex. There are 54 companies with an m-cap of Rs 1 trillion or more, up from 49 at the end of 2021.They include Bajaj Auto, Siemens, Britannia, and Ambuja Cements, among others.

Equity markets were volatile in 2022 due to monetary tightening, fears of global recession, and the crisis arising out of a Russia-Ukraine stand-off. Runaway inflation and China’s Covid woes put equities through the wringer.

India managed to stave off a big correction, notwithstanding record overseas outflows, as a result of domestic liquidity support and relatively better economic prospects. 
 

India’s dematerialised accounts crossed the 100-million mark this year. The decline in crude oil prices further emboldened investor sentiment. Crude prices declined 34 per cent from their highs in May this year.
 

The gains of Indian equity benchmarks were, however, muted compared to last year. In 2021, the Sensex gained 22 per cent. So far this year, the Sensex has risen 6 per cent.

Analysts attribute the rise in the trillion club during a year of muted returns as a sign of gains in equity markets being lopsided.

“The rally is not broad-based. It is concentrated in a few hundred stocks. Young investors who have thronged the equity markets of late buy into whatever is rallying,” said Chokkalingam G, founder, Equinomics Research & Advisory.

Some stocks gained due to a rally in their sectors. 

 

According to analysts, Britannia gained as input prices for fast-moving consumer goods (FMCG) companies are down and there is expectation of wheat prices coming down as well. Whenever there are rate hikes by the US Federal Reserve, there is foreign portfolio investor buying into FMCG since they are considered defensive bets.

“Among FMCG companies, Britannia posted the best volume and margin recovery after a slowdown,” said Deepak Jasani, head-retail research, HDFC Securities.

Participation of state-owned enterprises in the Rs 1-trillion club strengthened with the entry of Life Insurance Corporation of India and Coal India.
 

The six state-owned companies in the trillion club in 2021 have held on to their positions. The BSE PSU Index gained 24 per cent on a year-to-date basis.

Adani Group has the maximum number of companies in the trillion club at five, followed by Tata Group at four.

HDFC Bank added Rs 96,936 crore to its m-cap. Hindustan Unilever added Rs 84,197 crore.

Tata Consultancy Services, Infosys, Wipro, and HCLTech saw a dip in their m-cap.

“In the past two-three years, their revenue growth in dollar terms is in single digits. Battered information technology stocks in the US and rising employee costs have compounded the pressure,” said Chokkalingam.

Zomato exited the trillion club this year.  

“New-age companies have seen erosion in valuation because cash and net profitability are seeming more and more distant,” said Jasani.

Analysts said the expansion of the trillion club will depend upon whether gains in equity markets are broad-based — or not.

“If this skewed performance continues, there will be more m-cap companies entering the trillion club,” added Chokkaliingam.