June 21, 2024

The Art of Investment

Mastering the Stock Market Strategies

India achieves $5 trillion market capitalization milestone, triples in a decade of economic progress

3 min read
India has achieved a significant milestone, with its market capitalisation crossing the $5 tn mark on Tuesday, tripling in a decade of robust reforms and economic progress. The most heartening features of this growth in wealth have been:

Fall in the share of foreign institutional ownership from 19.13% to 16.51%, accompanied by a corresponding rise in domestic ownership.

Small investors, typically participating through mutual funds, have seen their ownership rise from 3.33% to 8.87%.

For the first time since opening to foreign investors, domestic investors have gained a larger share of incremental wealth.

India is set to become the world’s third-largest economy, with GDP expected to reach $5 tn within the next three years, and according to finmin projections, $7 tn by 2030. This remarkable achievement highlights India’s growth and resilience amid global uncertainties.

Ten years ago, India was the 10th-largest economy with GDP of $1.7 tn. Despite facing macroeconomic imbalances and a weakened financial sector, it has climbed to 5th position, boasting an estimated GDP of close to $4 tn. A series of substantive and pragmatic reforms have fortified the economy against global shocks. Key reform areas include: Governance improvements at district, block and village levels, making them more citizen- and business-friendly, particularly in healthcare, education, land and labour reforms, where state governments play a crucial role. Public sector capital investment has surged from ₹5.6 lakh cr in FY15 to ₹18.6 lakh cr in FY24.

With the goal of becoming a developed country by 2047, GoI is focusing on reforms and the active participation of states. India’s economy has consistently grown at over 7% annually for the past three years, fuelled by strong domestic demand. The growth pace is expected to continue and potentially accelerate with ongoing structural reforms and a robust financial sector, although geopolitical risks remain a concern.

With the $5 tn milestone achieved, the focus now shifts to the future. In the next five years, the Indian capital market has the potential to reach $10 tn, as projected by the likes of Jefferies Group.

India commands premium valuations due to higher growth, better prospects and a stable macro environment. The broader market at 20x one-year forward is only one standard deviation above the long-term mean valuation. This optimism is based on several key factors:

Key reforms like GST and IBC are expected to enhance business efficiency and investor confidence.

Tech advancements, such as digitalisation and technological innovation, are creating new growth opportunities. Rise of fintech, ecommerce and digital services is set to drive market expansion.

Infra-development projects, including smart cities, highways and RE initiatives, will attract substantial investments and boost economic growth.

India’s young and dynamic population is increasingly participating in the stock market, leading to higher investment inflows and sustained market growth.

Favourable investment climate is likely to attract more FIIs, further propelling the market towards the $10    tn target.

Despite global economic challenges, including supply chain disruptions, which have re-emerged in 2024, India’s economic outlook remains positive. The journey towards a $10 tn capital market is expected to result in substantial wealth creation, benefiting a broad spectrum of society. This growth will lead to job creation, improved living standards and greater economic opportunities for millions. Moreover, the expansion of the capital market will provide companies with the necessary capital to innovate, expand and compete globally.


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