New Delhi: What is India’s recent biggest ‘Make in India’ or ‘Atmanirbhar Bharat’ success story? It isn’t from the much touted manufacturing domain but from the services sector (should make the former RBI Governor Raghuram Rajan happy though he might ponder why it didn’t happen during his watch both as the regulator and also the Chief Economic Advisor).
Happily, the biggest ‘Atmanirbhar’ story emanates from the Indian stock market (financial services). A decade of reforms has resulted in a paradigm shift. Foreign Institutional Investors (FIIs) who for a large period post liberalisation have controlled the stock markets in India are today playing second fiddle to the Domestic Institutional Investors (DIIs) and retail investors.
FII exits have in the past resulted in pulverising the stock market most notably in 2008. FIIs are traditionally seen as primary drivers of stock market volatility. A positive FII flow generally increases the index, while a decrease in flow has the opposite effect.
$5t Journey
But Indian markets are witnessing just the opposite. Despite a record pull out since the start of the year, stock markets have been on the bull run. Overseas investors have offloaded Indian equities worth more than ₹22,000 crore in the month of May so far.
Sensex, however, breached the $5 trillion mark for the first time last week marking a mega stride. What is driving the stock market in India? Domestic Institutional Investors (DIIs) and retail investors, now exercising a pivotal role in counterbalancing FII exodus.
Prime Minister, who boasts of domestic indices stupendous success, has gone on record to pat domestic investors for playing a more substantial role than ever before. “This is a clear indication of financialisation of savings that have occurred in the last decade,” Prime Minister Narendra Modi had said in an interview to a Business daily.
Sensex has jumped from 25K to 75K under his watch and he predicts the market to soar further post poll results. Sensex added its last trillion in a record 117 days. Jefferies has projected the capital market to reach $10 trillion by 2029.
SIP Run
Consider the following facts that tell a story of resilience, revival and reimagining of the fundamentals of the Indian stock market. Of course, all this has been possible due to the inherent economic macros being in place, which should attract FIIs back in droves once the election volatility ends. Growing India needs them as well.
A new era of democratisation of wealth creation through mutual funds and equities is here to stay.
Last decade has witnessed a shift from a savings mentality to an investment psyche led by the young and restless who have shown greater faith in non-traditional banking instruments.
India is clearly undergoing a Systematic Investment Planning (SIP) phenomenon. The Indian middle class simply loves it. Out of an estimated 300 million households, 90 million are today SIP holders.
Mutual funds are consistently on a positive growth trajectory. According to Nirmal Jain of IIFL, small investors typically participate through SIPs and consequently their ownership has risen from 3.3 per cent to 8.87 per cent in record time. A record 32 million Demat accounts were opened in FY24, with 10 million added in the last quarter (Q4 FY24).
The younger generation is shying away from following the parental investment guide and are keen to embrace new age digital platforms. Experts credit the App economy for convenient on-the-go transactions, making investing accessible anytime, anywhere (rise of Zerodha, Groww and Upstox)
The rising SIP story has ingested first time jobbers and even housewives. Both early starters and those who now say it is never too late to start, especially via the SIP route, are joining the party. Let indices stay bullish for young India to grow fiscally!
(Disclaimer: The views expressed in this article are those of the author alone. The opinions and facts in this article do not represent the stand of News9.)
Despite a record pull out since the start of the year, stock markets have been on the bull run. Overseas investors have offloaded Indian equities worth more than ₹22,000 crore in the month of May so far. Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
