Priyanka Tiwari
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Suspense crime, Digital Desk : India's publicly traded companies have cumulatively added nearly $1 trillion to their market capitalization from March to June 2025, bringing it to $5.33 trillion. This marks a 21% increase which is the highest increase amongst the world’s top 10 stock markets, thereby establishing India as the fifth-largest equity market in the world after the US, China, Japan, and Hong Kong.
India Leads Global Equity Surge
India’s market performance outshone other major economies in the simultaneous timeframe:
Germany: +14%
Canada: +11%
Hong Kong: +9%
Japan & UK: ~8%
France: +3.9%
Taiwan: +3.2%
China: +2.7%
US: +2.4%
Sensex, Nifty, MidCap and SmallCap Rally
The Indian benchmark indices experienced significant increases:
Sensex: +12.5%
Nifty 50: +13.5%
BSE MidCap Index: +20.7%
BSE SmallCap Index: +26%
The recent rally is impressive, considering the five month period of correction from October 2024 to February 2025. Still, analysts caution that the current valuations are stretched too far, resulting in a downward revision in forward earnings expectations.
EPS Projections Seem To Indicate Stress
As noted by JM Financial, the Nifty 50 EPS projections for FY25 were increased by only 0.3% in April 2025 while projecting declines of 1.1% and 1.0% for FY26 and FY27 respectively. These increases remain lower than the February and March projections, indicating worsening profitability for the company.
Consensus in Bloomberg predicts a 14% YoY earnings increase for Nifty 50 companies for FY26. While this sounds promising, analysts are exercising caution based on tighter margins, shrinking profit margins, and robust competition.
Concerns on Valuations have resulted in Analyst Caution
Sanjiv Prasad from Kotak Institutional Equities argued that Indian equities are, in broad terms, overvalued. He further explained that consumption, IT, and investment themes are trading at more than 22x forward earnings, but the Nifty 50 is only trading at 22x forward earnings; such sectors’ earnings are instead valued above pre-pandemic levels, and on muted earnings.
Most sectors excluding financials appear expensive. One concern analysts have is that earnings are likely being discounted with stale growth estimates, meaning that a structural risk to valuation is very likely as revenue and profit decline.
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