Need to channel savings into domestic equity market, says Deepak Parekh

“We need to stand on our legs, we need to mobilise and catalyse India’s savings” into the equity market, said Deepak Parekh, Chairman, HDFC.

It is a good that over the last couple of months Indians have invested about ₹10,000 crore a month in mutual funds, particularly equity-linked funds. But we need to develop the markets more, including “increasing insurance investments in equity markets,” he said at the KS Narayanan Oration 2017, to mark the birth anniversary of the founder of the Sanmar Group.

At the event in which Parekh interacted with Shekhar Gupta, Chairman and Editor-in-Chief, ThePrint, he said the domestic equity market has been dominated by foreign investments and over the last one year the market has taken a hit as inflows have been slow. Other markets have appreciated well, including Brasil’s which is up 40 per cent.

With the new government in the US increasingly looking inward, India needs to take steps to support its market with domestic investments. People’s interest in mutual funds, sparked by falling bank interest rates, is a positive sign. Investments in mutual funds and other instruments are bound to increase, these will be a function of bank rates rather than the short-term impact of demonetisation, he said in response to a question from Gupta.

India has done well even with two of the engines of growth running slow — private consumption and private sector investments. But government expenditure, particularly public sector company investments, are on the increase.

Private consumption has slowed after November (when the government announced that high-value currencies of ₹ 1,000 and ₹500 will not be legal tender) but will come back, Parekh said.

Private sector investments will happen only with better capacity utilisations in industry. “Our industries are operating at 70 per cent and need to pick up to 80-90 per cent before investments happen, Parekh said.

India will also have to deal with China as it looks to play a dominant role as US increasingly starts looking inwards. This has always been “tricky” as it focusses on exports without regard for viability and is known to dump goods, he said, referring to China dumping steel into India at below the cost of production here till India stepped in to protect its domestic industry.

State governments too need to be more dynamic and ease of doing business is a key area that needs to be addressed, he felt.

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