The exemplary performance of the Indian stock market compared to the world and emerging markets over the years demonstrates India’s resilience to global geo-political and economic shocks, according to the Economic Survey 2023-24 tabled by Finance Minister Nirmala Sitharaman in Parliament ahead of Union Budget 2024.
As per the Economic Survey, the global equity markets recovered from a highly turbulent global environment in FY23 and performed well during FY24. Except for China and Hong Kong, all the major markets including the USA, Brazil, and Japan delivered higher returns during FY24 compared to the previous year.
Indian stock market was among the best-performing markets, with India’s Nifty 50 index surging by 26.8 per cent during the last financial year compared to an 8.2 per cent decline in FY23.
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“Capital markets are becoming prominent in India’s growth story, with an expanding share in capital formation and investment landscape on the back of technology, innovation, and digitisation,” the survey noted.
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The number of initial public offers (IPOs) increased by 66 per cent in FY24 from 164 in FY23 to 272 in FY24, while the amount raised grew by 24 per cent from Rs 54,773 crore in FY23 to Rs 67,995 crore in FY24.
The number of IPOs/FPOs (Follow-on Public Offers) of SMEs increased by 1.6 times from 125 in FY23 to 196 in FY24, while the corresponding fund raised increased by over 2.5 times over the previous year from Rs 2,333 crore in FY23 to Rs 6,095 crore in FY24.
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According to the survey, India’s market capitalisation to GDP ratio has improved significantly over the last five years to 124 per cent in FY24, compared to 77 per cent in FY19, significantly higher than that of other emerging market economies like China and Brazil.
CEA V Anantha Nageswaran raised caution that the market capitalisation to GDP ratio is not necessarily a sign of economic advancement or sophistication. “Financial assets are claims on real goods and services. If equity market claims on the real economy are excessively high, it is a harbinger of market instability rather than market resilience,” he said in the survey.
Indian capital markets have seen a surge in retail activity through direct and indirect channels in the last few years. The individual investor’s share in the equity cash segment turnover was 35.9 per cent in FY24. The number of Demat accounts with both depositories rose from 11.45 crore in FY23 to 15.14 crore in FY24.
“The impact of this influx of individual investors in the market is also reflected in new investor registrations with the exchanges, their share in total traded value, net investments, and ownership in the listed companies,” the document noted.
“For instance, the registered investor base at NSE has nearly tripled from March 2020 to March 2024 to 9.2 crore as of 31 March 2024, potentially translating into 20 per cent of the Indian households now channeling their household savings into financial markets,” it added.
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The Mutual Funds (MF) segment has seen more substantial retail participation as assets under management (AuM) of the MFs increased by Rs 14 lakh crore to Rs 53.4 lakh crore at the end of FY24. The total number of folios increased from 14.6 crore at the end of FY23 to 17.8 crore at the end of FY24.
The Economic Survey cited seamless technological integration, government measures towards financial inclusion, growth of digital infrastructure, rapid smartphone penetration, and a rise of low-cost brokerages as some of the factors behind the entry of retail investors in the markets.
“A conducive economic environment in the form of lower interest rates, sustained post-COVID-19 recovery, elevated inflation, and a supportive policy backdrop also boosted the retail accumulation of capital market assets,” the annual document noted.
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