Eco Survey: Mkt Cap/GDP ratio at 91.5%

Sustained investor interest will keep alive the buoyancy in stock market, which peaked to 14,724 points this month, helping India catch up with mature markets in terms of market capitalisation to GDP ratio.

The ongoing financial and regulatory reforms for the capital market, together with accelerated economic growth and macroeconomic stability, sustained the investors' confidence in the country's capital market, said the Economic Survey tabled in Parliament today.

India with a market capitalisation of 91.5% of GDP compared favourably not only with the emerging markets but also with economies like Japan (96%) and South Korea (94.1%) and shows signs of catching up with some of the mature economies.

The market value of Indian stocks was second highest among all emerging markets, surpassing those of markets like Thailand, Malaysia, South Korea and Taiwan at the end of 2006.

In comparison, China's market cap was just 33.3% of GDP at the end of 2006.

Market cap in terms of GDP indicates the relative size of capital market, besides investor confidence and discounted future earnings of corporate sector.

"Improved investor awareness and expanding equity cult among the small savers appear to augur well for buoyant stock markets," the Survey said.

The expectations of higher corporate investment and earnings, robust GDP growth and government's commitment to carry forward economic reforms are also expected to scale up FII (Foreign institutional investors) interest to retain India as one of the preferred destinations.