India’s stock market capitalisation has the potential to touch about $50 trillion by 2047, when the country turns 100, Ashish Chauhan, Managing Director & CEO, National Stock Exchange (NSE) said on Thursday.

This is going by the assumption that India’s GDP — which is at $3.4 trillion now — will grow to about $30 trillion by 2047 and the market cap-to-GDP ratio will increase from 1.2 to 1.6 per cent, Chauhan said at the Global Economic Policy Forum 2023, organised by the Department of Economic Affairs in Finance Ministry and Confederation of Indian Industry (CII).

There is good possibility that India’s capital markets, which are ranked fourth globally by market capitalisation, would be among the top two by 2047, he noted.

Chauhan highlighted that NSE will in 2024 enter into the thirtieth year of its operations, which began in 1994. 

“India’s GDP in 1994 was $280 billion, while its market cap was $120 billion, reflecting 44 per cent (0.4 market cap to GDP ratio). Today the GDP has grown to $3.4 trillion and market cap has gone up to $4 trillion, reflecting a ratio of 1.2”, he said.

Chauhan said that Incremental Capital Output Ratio (ICOR), which is about 4 now, will come down in the coming years due to technology advancements and this will boost India’s stock market capitalisation. 

Equity investing

Chauhan noted that engines of growth have changed in the Indian economy and the Indian capital market story is better understood by large section of investors. Today, 17 per cent of Indian households are directly investing in stock markets. If the indirect routes are factored, then nearly 30 per cent of Indian households are having investments in equity markets.

Ridham Desai, Managing Director, Morgan Stanley India, noted that Indian households with exposure to stock markets are now second largest voting cohort after farmers.

He highlighted that India’s physical economy is still 4-5 decades behind the US, but India’s financial markets are right out there, indicating that India has made rapid strides on capital market development front. 

“The regulatory framework for equities in India is very robust. It is a lesson for lot of other emerging economies to see what India has achieved in the last two to three decades”, he said. 

At the same time, Desai highlighted that there is lot of reforms that could be pursued, including opening up stock lending in a big way. “We also need a longer list of single stock futures”, he said.

Polls and markets

Referring to the upcoming General Elections, Desai felt that the markets will price in continuity (of the current dispensation). If the country produces a result contrary to expectations, then one could see huge volatility and maybe a drawdown of 25 per cent, he said.

He noted that Indian markets still don’t have hedging mechanisms for certain big events like general elections. “There is no mechanism to do long dated put,” Desai said.

Later, asked about the status of NSE’s Initial Public Offering (IPO), Chauhan told businessline that it was for market regulator SEBI to decide this matter.

Rajnish Kumar, Chairman, Mastercard India and former Chairman, State Bank of India, said “ We are proud of our equity market but there is still lots of catching up to do in debt market. We must develop an ecosystem where the dependence on banks as an intermediary goes down and the role of the debt market increases.”

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