Economic Survey 2023-24:Capital markets becoming prominent in India’s growth story

Indian capital markets have been one of the best-performing among emerging markets in FY24 despite heightened geopolitical risks, rising interest rates and volatile commodity prices reflecting India’s bright economic stature, the Economic Survey 2023-24 report released on July 22 noted.

Finance Minister Nirmala Sitharaman on Monday tabled the Economic Survey 2023-24 and Economic Survey 2023-24 statistical appendix in Lok Sabha a day before the Union Budget 2024 presentation.

The report further said that capital markets are becoming prominent in the world’s biggest democracy’s growth story, with an expanding share in capital formation and investment landscape supported by technology, innovation, and digitisation.

Primary markets remained robust in FY24, with fundraising increasing to ₹10.9 lakh crore compared to ₹9.3 lakh crore in FY23. Of the total amount raised in FY24, 78.8% was raised through debt issuances.

The number of IPOs significantly increased by 66% to 272 in FY24 from 164 in the previous financial year. The total amount raised rose by 24% from ₹54,773 crore to ₹67,995 crore in the same period. Indian exchanges, according to the E&Y Global IPO Trends report, were global leaders in IPO listings.

The corporate debt market has shown commendable growth in FY24, with the value of corporate bond issuances jumping to ₹8.6 lakh crore from ₹7.6 lakh crore in the previous fiscal. The fundraising by REITs and InvITs soared more than five times to ₹39,024 crore, buoyed by the Government's thrust on infrastructure development.

The report added that India's market capitalization to GDP ratio increased dramatically during the previous five years, from 77% in FY19 to 124% in FY24. This ratio is much greater than that of other emerging market economies, such as China and Brazil.

The domestic equity market capitalisation reached ₹415 lakh crore ($5 trillion) in May 2024, putting it in the fifth position in the global rankings. Over 9.5 crore individual investors have nearly 10% direct ownership of the market through 2500 listed companies.

The rise in retail activity led to individual investors' share rising in the equity cash segment turnover to 35.9% in FY24. The surge in retail activity was more substantial and steadier via mutual funds. FY24 was a spectacular year for MFs as their AUM increased by ₹14 lakh crore to ₹53.4 lakh crore.

Since most new retail investors are likely young and may have a higher risk appetite, the report said that the regulatory bodies should raise awareness and warn them of the low and negative returns from derivative trading.

According to SEBI reports, nine out of 10 traders lose money in F&O trading, still, the interest has significantly increased in the past few years.

Following the favourable investors’ sentiment, benchmark indices reached all-time highs in FY24, with the Sensex surging around 25%.