The Buffett Indicator: Market Cap to GDP Updated Chart


It captures approximately 80% of the available total market capitalization. For these reasons, it’s a much better measure for ‘market cap’ than the Dow Jones. India is already the fastest-growing economy in the world, having clocked 5.5% average gross domestic product growth over the past decade. Now, three megatrends—global offshoring, digitalization and energy transition—are setting the scene for unprecedented economic growth in the country of more than 1 billion people.

market cap gdp ratio india

Earnings in the U.S. often set the tone for general market moves, and we may see a rebound in big tech companies that have corrected severely, says Jasuja. Private weather forecasting agency Skymet has predicted below-average rainfall, while the India Meteorological Department has predicted 2023 rainfall at 96% of the long-period average, with a model error of ±5%. This prediction is considered a “normal” year based on early estimates, with a threat of El Nino making an impact. The last week of May will see detailed updates on rainfall and monsoon onset. The positive momentum of April is expected to continue in May with volatility persisting due to various macro and micro-economic factors, say the majority of experts. Please note that you are required to read and accept the terms of ourPrivacy Policybefore you are able to access our websites.

GDP per Capita in India was $1,987 in 2017, an increase of $113 from $1,874 in 2016; this represents a change of 6.0% in GDP per capita. The ratio is easy to calculate, and the data is readily available through reliable sources. The bond yields have not sustained their high and immediately crashed along with the markets.

Comparisons across Time Periods


As more companies are listed on the exchange, the listed market cap will increase, and stock valuations will also rise. For debt, investment-grade-rated instruments should be on top of the list. With interest rates at peak, it is a good time to lock in a yield for your safer debt instruments. In particular, look out for corporate bonds issued by established companies with strong fundamentals.

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However, all these ratios look very similar – and since some calculations for the Dow Jones go back to 1790, this ratio provides an interesting historical perspective. Indices that showed market cap gdp ratio india blockbuster growth this month include realty, PSU banks, auto and small caps. When interest rates are high, bonds pay a high return to investors, which lowers demand of stocks.

What Should Investors Watch Out For In March

Given these definitions, there are some differences between what the numerator and the denominator are measuring. While GDP is constrained by a time metric — one year — market capitalization is effectively looking to infinity. Further, while market capitalization is influenced by earnings, GDP corresponds to the annual turnover of the companies. The total market value of the stock market, as measured by Wilshire 5000, was $26.1 trillion. To calculate the total value of all publicly traded stocks in the U.S., most analysts use The Wilshire 5000 Total Market Index, which is an index that represents the value of all stocks in the U.S. markets. The quarterly GDP is used as the denominator in the ratio calculation.

market cap gdp ratio india

Profits make up much of Saudi Arabia’s GDP since its economy depends on the low-cost high-profit oil industry. In 2018, Saudi Aramco led the world with $111 billion in profits, which accounted for about 12% of the country’s GDP, with the rest of the corporate sector contributing a further share. In the United States, between 2000 and the COVID-19 outbreak, the total share of corporate profits ranged between 5% and 12% of GDP.

The definitive textbook on all topics related to investment valuation tools and techniques. The greatest investment advisor of the twentieth century, Benjamin Graham, taught and inspired people worldwide. The father of value investing, this is the updated classic from 1949. The current Buffett Indicator value of 167% is 0.9 standard deviations above the trend line, indicating the market is Fairly Valued.

S&P 500 to GDP Ratio

During the peak of the .com bubble when the Buffett Indicator was very high, the 10Y Treasury rate was a bit higher than average, around 6.5%, showing that low interest rates weren’t juicing the stock market. Today the Buffett Indicator is still quite high relative to its historical trend line, but interest rates are still relatively low, currently at 3.44%. Finally, this ratio is impacted by trends in Initial Public Offerings , and the percentage of companies that are publicly traded . All else being equal, if there was a large increase in the percentage of companies that are public vs. private, the Market Cap to GDP ratio would go up, even though nothing has changed from a valuation perspective. Stock market capitalization to GDP (%) in India was reported at 97.29 % in 2020, according to the World Bank collection of development indicators, compiled from officially recognized sources. India – Stock market capitalization to GDP – actual values, historical data, forecasts and projections were sourced from the World Bank on May of 2023.

It can be applied to any country with a decently active financial market from which the total market cap can be collected. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities.

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The sector in recent times has not performed well and that provides some degree of valuation comfort with improving profitability. On a month-on-month basis, the NIFTY 50 saw a decline of 1.7% ending February 28, 2023 and the Sensex closed 0.62% lower for the same period. Sheth too advises proper due diligence of companies with investing only in companies that have strong fundamentals.

market cap gdp ratio india

One country’s value is not indicative of other countries as these countries have similar valuation metrics for their market cap to GDP; it changes for every country. The ratio works like any relative valuation metric, like a price-to-earnings (P/E) or a price-to-sales (P/S) multiple, where it is compared with the historical average to get a relative valuation verdict. Ankit Gupta, founder of advises investors to focus on quality stocks, i.e., companies having growing revenue and growth prospects over momentum stocks. “Investors should also look out for USD and rate sensitive stocks as USD is expected to come down”, says Gupta. Investment gurus are also suggesting this is a good time to add investment-grade corporate bonds in a portfolio with an average duration of two to three years to fixate on high yields.

India GDP Per Capita 1960-2023

A combination of profitability and valuation will give a good representation of the overall value of the country’s markets. As it is a relative metric, the current data can be compared with the empirical data at various time periods to assess and review the current scenario. As money exits, the market valuations start to drop, creating a domino effect.

All else being equal, if there was a large increase in the percentage of companies that are public vs. private, the market cap to GDP ratio would go up, even though nothing has changed from a valuation perspective. Historical Total Assets of Central Bank of India in billions of national currency, which is obtained from each country’s central bank balance sheet. Please be aware that if the total assets is displayed as zero or – , it suggests that there’s no data available rather than the original data being zero. In this case, the modified version of both the ratio and projected annualized market return will be treated the same as the original version.

Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. The ratio cannot be compared across countries, even in similar economic and political environments. Another problem with the Buffet indicator is that historically it is observed that the mean and average of the metric have kept on rising. A 157% Market Cap to GDP can be termed as modestly overvalued for Canada.

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