India could have its first stock with a market value of $1 trillion by 2032, according to ICICI Securities, and there are three contenders: HDFC Bank Ltd., Reliance Industries Ltd. and Bajaj Finance Ltd.
The first company to breach the market cap of $1 trillion would be on the back of peak corporate profitability of 7% and gradual advancement towards peak GDP growth of 9%.
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Other key assumptions, according to the brokerage firm, include the "ratio of the largest stock's market cap to aggregate market cap sustaining at a long-term average of 5-6% and no re-rating in P/E ratios from current levels.".
ICICI Securities, in its note issued on Jan. 13, also said that 30–40 stocks with a $100 billion market cap may exit in 2032. The forecast is based on the historical average of companies with a market value greater than a tenth of the most valued company's market cap.
The brokerage sees HDFC Bank as the most likely company to first breach the mark. The other two companies include Reliance Industries and Bajaj Finance. The list is based on the company's hurdle rate, which should be close to its past long-term profit CAGR track record.
HDFC Bank's hurdle rate, according to the brokerage, is approximately 25.5% against its historical profit growth trajectory of 20%, making it their first choice. On the other hand, Reliance Industries could reach the mark if its profit growth trajectory jumps to 21%, ICICI Securities said.
Similarly, if Bajaj Finance maintains a past growth rate of 35–40% over the next decade, then it will reach the $1 trillion market cap. This will only happen if the company has no P/E re-rating, it said.
When the markets reach the point where a company has breached the $1 trillion mark, it will indicate the deepening of the Indian markets and, at the same time, improve the large free floats available for investors, the note said.
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