Bridge over ocean
3 March 2021 Article

The Emerging Asia Pacific Capital Markets: India

  1. Rajendra Kalur, CFA
  2. Shwetabh Sameer, CFA, CIPM

After a massive capital markets transformation, India has two of the largest stock markets in the world and an expanding asset management industry. But further improvements will be needed for India’s markets and economy to achieve their potential.

The Indian capital markets have experienced a significant structural transformation since India opened its economy to the world in the 1990s. Today it boasts two of the world’s largest stock exchanges—NSE and BSE—and is considered one of the most preferred investment destinations for international capital, as evidenced by continued growth in foreign investments. In addition, the asset management industry has seen massive growth, with increasing interest from domestic retail investors. These developments can be attributed to a series of supportive steps undertaken by the Indian government, regulators, and policymakers, which adopted a more business-friendly stance. That said, India is still far away from tapping the full potential that it can achieve. Its fixed-income and commodity markets are still shallow, with fewer incentives for market participants. Moreover, the exchange-traded fund industry is still in its infancy when it comes to investor awareness and market structure. In order for Indian markets to achieve their full potential, stakeholders need to come together and take steps that can remove bottlenecks and ensure that the huge amount of savings available in the economy is harnessed sufficiently to power the growth engine, as the Indian economy grows toward achieving the $5 trillion target.

This article is from "The Emerging Asia Pacific Capital Markets: Challenges and Opportunities," published by CFA Institute Research Foundation.

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