Financial Survey credit retail investor surge for progress in India’s capital markets

India’s inventory markets overcame challenges akin to geopolitical tensions, foreign money fluctuations, and home market volatility to succeed in new heights in FY25, pushed by an growing variety of buyers, lively itemizing actions, and regulatory assist, in accordance with the Financial Survey 2024-25.

The capital markets are central to India’s progress story, catalysing capital formation for the true economic system, enhancing the financialisation of home financial savings, and enabling wealth creation, the Survey famous. Over an extended interval, India’s inventory market has been one of many high performers globally, with a compounded annual return of 8.8% over the previous 10 years, in accordance with the survey.

The variety of retail buyers in India surged to 132 million as of December, up from 49 million in FY20, reflecting a rising belief within the capital markets.

“This progress, mixed with lively itemizing exercise and up to date measures by the Securities and Alternate Board of India (Sebi) to mood excesses, is anticipated to foster sustainable market growth,” the Financial Survey acknowledged.

There was heightened exercise within the major markets in FY25, with India turning into the worldwide chief in IPO listings.

“India’s share in international IPO listings surged to 30% in 2024, up from 17% in 2023, making it the main contributor of major useful resource mobilisation globally,” the report famous.

From April to December 2024, whole useful resource mobilisation from the fairness and debt markets reached ₹11.1 trillion, which is 5% greater than the quantity mobilised throughout all of FY24.

IPO sizes

The rise in IPO numbers, which jumped by 32.1% from 196 to 259 within the first 9 months of FY25, displays the buoyant market circumstances.

“The mainboard platform witnessed a big improve in problem dimension as the typical IPO deal dimension rose to ₹2,124 crore, up from ₹814 crore in whole FY24. Within the case of small and medium enterprises (SMEs) IPOs, the typical deal dimension elevated to ₹39 crore from ₹31 crore throughout the identical interval,” in accordance with the report.

Along with the fairness markets, the company debt market gained traction. From April to December 2024, ₹7.3 lakh crore was raised via company bonds, with non-public placements accounting for 99.1% of the whole debt issuance.

Nevertheless, the report identified that India’s company bond market stays undercapitalised.

“As a proportion of GDP, the company bond market is simply 18% in India, versus 80% in Korea and 36% in China,” the survey stated.

Liquidity within the debt market might enhance if sure challenges are addressed, it stated.

“If liquidity has to enter company bond markets, issues akin to entry prices, info asymmetry, and the absence of a secondary market have to be addressed,” the report steered.

The secondary markets exhibited constructive efficiency, with the Nifty 50 index returning 4.6% from April to December 2024, regardless of vital volatility attributable to international occasions such because the US elections and escalating worldwide conflicts.

The surge in investor participation has been significantly noteworthy. As of December 2024, the variety of demat accounts reached 185 million, a 33% improve year-on-year.

“Larger investor participation has engendered a self-reinforcing cycle of robust market returns, bringing in much more buyers. This, in flip, will finally rework the securities market right into a extra various, inclusive, and sturdy platform for wealth creation,” the report noticed.

Furthermore, there was an enormous uptick in retail participation within the mutual fund sector, with belongings underneath administration (AuM) growing by 25.3% from March 2024 to ₹66.9 trillion.

The report highlighted the expansion in systematic funding plan (SIP) inflows.

“Month-to-month common gross SIP flows have greater than doubled within the final three years, from ₹0.10 lakh crore (trillion) in FY22 to ₹0.23 lakh crore in FY25,” it acknowledged.

The constructive efficiency of the Indian inventory was pushed by robust profitability progress, fast traction of digital monetary infrastructure, an increasing investor base and substantial reforms in merchandise and processes.

Wholesome company earnings, steady macro fundamentals, environment friendly and sturdy know-how structure facilitating environment friendly buying and selling, clearing, and depository programs, and belief garnered by the mutual fund ecosystem and on-line digital funding platforms have inspired larger participation within the capital markets.