Home / Money / Personal Finance /  The opportunities and challenges for India’s stock markets

With India envisioning a $10 trillion economy by 2034, there are challenges and opportunities that the country faces over the next decade. That was the crux of a debate at the Mint Mutual Funds Conclave 2022.

Vivek Kaul, author of Easy Money trilogy, highlighted the challenges and said Indians should be aware of the risks of investing in mutual funds and stocks. They should not get carried away by the historical returns of Sensex, which are pegged at 17% since inception. “The bulk of these returns were generated in the first 15 years of the existence of the Sensex which was up until 1994 (since 1979). The returns have been subdued since then,“ said Kaul. Bumper returns over the past 2-2.5 years have been due to rising formalization of the economy and higher operating profits.

Kaul believes that investors are underestimating the negative impact of the end of an era of easy money. For India specifically, he flagged that India’s demographic dividend was not in great shape and highlighted the data put out by the Centre for Monitoring Indian Economy (CMIE), International Labor Organization, suggesting a falling labour participation.

“The sad part is that the labour participation rate for women has collapsed," Kaul added. He also highlighted that the Indian economy had an uphill task to triple in size over the next 15 years.

Feroze Azeez, deputy CEO, Anand Rathi Wealth Ltd, was bullish about the prospects. India is into a bull run, and there will always be some corrections during this phase. “If you want to take three times more than a fixed deposit, you can’t resist the nature of the animal, you have to embrace it," he said.

The constant rise in corporate profits even amid the talks of gloom and doom bodes well for the stock markets, he said. Noting the retail participation in equity markets, he said the contribution via monthly SIPs is currently more than 12,000 crore, which has remained so amid tough market conditions. This has supported Indian markets amid widespread foreign sell-off. “If India continues this global outperformance on the back of domestic liquidity, all the global emerging market indices will give larger weight to India," he said.


Abhinav Kaul

Abhinav Kaul writes on cryptocurrencies and mutual funds at Mint. His previous stints include ETMarkets, Reuters Bangalore and Press Trust of India.
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