India could become 5th largest stock market by 2024: Goldman Sachs

As many as 15 private firms could potentially list on India’s stock market over the next 36 months, which could grow to more than $5 trillion to become the fifth largest in the world within three years, says Goldman Sachs. And the prospects have brightened further as, so far this year, Indian startups have raised $10 billion through IPOs.

Goldman analysts believe the pipeline for future public listings is expected to remain robust over the next two years. “We estimate nearly USD 400 billion of market cap could be added from new IPOs over the next 2-3 years,” the report said. “We stay overweight on expectations of a strong cyclical recovery and supportive flows. Additionally, the strong thematic appeal and growth potential of the new economy sectors lend support to our medium-term constructive view.”

Goldman said the number of so-called unicorns startups valued at over $1 billion surged in India in recent years. “That’s due to the rapid growth in the internet ecosystem, combined with better availability of private capital and a favorable regulatory environment.” The Bank estimates there are at least 67 private startups in India that fit the definition of a unicorn. 27 of them hit the $1 billion valuation mark in 2021; most of them are focused on India’s digital economy.

Moreover, India’s share in the global stock market value is expected to rise from 2.8% to 3.7% over the next five years, which is higher than Goldman’s prediction of 40 basis points increase in India’s share of global GDP over the next five years. The Banks analysts highlight the lack of fast growing new economy and digital stocks in the index has meant that India’s earnings have lagged the region while the internet-heavy China index, on the other hand, has delivered the best earnings over the past decade. “Looking forward, we think Indian equity indices could see a larger representation of the new-economy sectors over the next two to three years as the large digital IPOs get included in the index.”

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Goldman’s analysts expect segments like e-commerce, internet, internet retail and media to have more weight on indexes, through the consumer discretionary and communication service sectors. They predict that other sectors such as commodity and software services would likely see their weightage shrink.