Bullish over Indian stock market’s growth potential, top bourse BSE’s chief Ashish Chauhan has said its market capitalisation can grow over ten times in the next 10-15 years to surpass USD 10 trillion level with a right approach at various levels.
The markets, however, need to become a vehicle for generating funds to be invested across various sectors, rather than just being trading platforms, he said.
“If India has to take its rightful place at the global platform, it also needs to have a much higher market capitalisation and we need to have a large amount of participation from every nook and corner of the country,” Chauhan told PTI in an interview.
When asked how and by when Indian markets can get an overall valuation of USD 10 trillion, the BSE MD and CEO said, “Indian markets would need to work to reach that target.
“Today we have reached around USD 1.6 trillion (over Rs 100 lakh crore) and over the next ten years, if we work hard, we increase our investor base, from within India and abroad, we increase investments in different areas, then there is no doubt that India can grow 10 times over the next 10-15 years.
“So, by 2030 we can reach that range. There are USD 40 trillion of wealth waiting globally for good markets and India need to take its share from there.”
On steps required to broaden the investor base, Chauhan said there are an estimated 2.7 crore investors in India and a lot of efforts would be required to expand this to 27 crore by 2030.
“In the last 20 years, the Indian middle class has grown ten times, but the number of investors has remained similar.
“In some sense, we can say that BSE and other participants have not been able to do enough to bring people to the markets. For example, Sensex has given a return of about 300 times in the last 35 years, but has this return been shared by all in the country?
“Basically, we need to educate investors and make them aware. Now is the time for BSE and others to stand up and be counted.
“When nation is on a path to growth, BSE also has to move hand in hand and to ensure that the capital requirement of the economy is made available to them,” Chauhan said.
Elaborating further, he said that BSE has been there for 140 years and has helped India create, as a catalyst, investor wealth of USD 1.6 trillion or over Rs 100 lakh crore.
“In some sense, it could have done much more. BSE has to exist for the nation and it cannot be thinking for itself alone.
“So, the BSE must work for capital formation, arranging funds for investment and contribute to nation building, rather than just for doing trading for the sake of trading.”
He said that the companies have raised USD 10-12 billion of funds annually from Indian markets over the last 2-3 years, but the Indian markets need to generate funds to the tune of USD 150 billion a year to support investment requirements of the next 5-6 years.
He said Indian markets are among the most sophisticated markets and also among the most spread-out markets in the world and everything is automated in our markets.
“If you see the numbers, India is now a USD 2 trillion economy and it saves 30 per cent, so India effectively saving USD 600 billion a year and over the next seven years it would be saving at least USD 4.2 trillion at current level. These savings could be to the tune of USD five trillion after taking into account growth in the economy.
“Today also, around 10 per cent of savings go into financial instruments, so on a USD 5 trillion base we would be able to bring in at least USD 500 billion and the remaining USD 250 billion can come from the foreign investors.
“Over the last 20 years, foreign investors have invested USD 220-250 billion and if India grows at its pace and gains further momentum, that kind of funds can come easily going further.”
What India needs to do is focus on moving people away from gold, silver and real estate that are not productive assets and shift the savings towards financial instruments, which can be bank deposits, mutual funds or directly into the stock markets, where investments can be used for providing funds to the infrastructure, manufacturing, defence and services, he said.
Those sectors basically create jobs and the government would not be able to create the jobs directly. India needs to create 1.5 crore new jobs every year for the next 20 years, he added.
“So, when a person invests in financial instruments, he not only gets the returns but also participates in the nation building.
“If we are able to convey this to our large population that saves a lot, we will be able to generate the funds. Today, the way automation has progressed and the increased penetration of mobile trading, internet etc would make things easier.”
Chauhan said that there is also need of policies that are amenable to investments and not promote trading just for the sake of trading. Today, the stock market has somehow become focussed more on trading, rather than investment activities.
“So, they need to move away from trading-focussed business and focus on investments to help the country build the manufacturing sector by raising funds for new and existing companies. This would be mutually beneficial for the country as well as the market participants.
“These things, would however require structural changes in STT and the business model of the exchanges. Today, a large part of revenue for exchanges come from trading and therefore they also focus a lot on trading.
“That takes away their focus away from the capital formation. So, the exchanges also need to change their business models, while government needs to make some policy changes such as providing tax benefits,” Chauhan said.