The last few decades have belonged to market infrastructure institutions (MIIs) in India - stock exchanges, depositories and clearing houses - thanks to a vibrant economy. MIIs have played a vital role in expanding the reach of stock trading to every nook and corner of the country and have therefore grown quite remarkably.
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The market capitalisation (m-cap) of Indian stocks recently crossed the coveted $5-trillion mark, making it the fifth market to join this exclusive club alongside the US, China, Japan and Hong Kong. Pantomath Group expects India’s market-cap to hit $10 trillion by 2030.
According to NSE data, the average daily turnover (ADT) zoomed to ₹81,720 crore in FY24 in the cash segment, from a mere ₹5,340 crore in FY01. In the first three months of the current fiscal, ADT crossed the ₹1-lakh-crore mark.
Demat accounts handled by Central Depository Services Ltd (CDSL) crossed the 12-crore mark and stood at 12.55 crore at the end of June. Together with National Securities Depository Ltd, the number of demat accounts crossed the 15-crore mark.
An NSE study has revealed that the number of companies with over two lakh investors has increased from 59 to 178 in a decade; with over five lakh investors, from 12 to 72; with over 10 lakh investors, five to 39, and with over 25 lakh investors, from two to 16.
For the last several years, NSE has been the world’s largest derivatives exchange. The growth of asset management companies is also praiseworthy. The MF industry’s AUM stood at a staggering ₹61.16 lakh crore as of June 2024. It has witnessed over five-fold growth in AUM in the last 10 years and may surpass the ₹100 lakh-crore mark in the next two-to-three years, said ICRA Analytics in a report.
The total number of folios (unique MF accounts), as on June 30, 2024, stood at 19.10 crore. Inflows into MF systematic investment plans (SIPs) have been on the rise and creating records. SIP inflows stood at ₹21,262.22 crore in June.
IPOs in sweet spot
When the secondary market is buzzing with activity, can the primary market lag behind? The initial public offering market is in a sweet spot, with several SMEs knocking at the doors of the capital market. Besides traditional industrial players, several unicorns have entered the market in the last few years, with the latest being Ola Electric Mobility, first pure EV company to tap capital market.
According to EY - “India shows a notable presence, with 7 per cent of unicorn IPO candidates. The high concentration of unicorns in these regions indicates robust ecosystems that support innovation, funding opportunities and favorable regulatory environments, making them prime locations for start-ups aiming to go public.”
High-profile companies including Hero FinCorp, HDB Financial, NSE India, MobiKwik, Hyundai Motor India and Bajaj Housing Finance are likely to hit the capital market sooner or later.
Untapped potential
Despite such phenomenal growth of capital markets and MIIs, ICRA believes that the modest share of wallet of the equity segment in household savings indicates untapped potential for sustainable growth for the broking industry over the long term.
All these numbers go to show that India is in a structural growth phase when it comes to capital markets. The recent proposals by SEBI to rein in F&O trading and in the Budget, to impose additional capital gains tax must be seen in this context. They may slow down growth in the short run. However, this should be a temporary blip. It may even prove a Godsend entry point if the correction turns out to be deep. In the long run, these institutions will survive and can grow exponentially, given the young population and rising financial literacy.
The time may therefore be ripe to have an index or passive funds tracking MIIs. We have several listed players across the spectrum of MIIs and market-linked companies - be it exchanges (BSE, MCX, IEX); depository (CDSL); asset management companies (Nippon Life India, HDFC AMC, UTI and Aditya Birla Sun Life; over two dozen brokerages (including Angel One, Motilal Oswal Financial, Geojit Financial, ICICI Securities, 5Paisa.com, Edelweiss, Anand Rathi, IIFL Securities and Nuvama); MF distributors (CAMS); and even Registrar and Share Transfer Agent (KFin Technologies).