Change is the only constant and with the recent pandemic having thrown our lives out of gear, the impact on different industries in India has been varied, but what is constant is that India’s growth story is not going to lose its charm any time soon: rather it has all the makings of magnum opus. People who know me or ask my favorites for investments, they know NASDAQ has been at the top of my list since a long time. No other composite has delivered this level of innovation, particularly in technology and related sectors as NASDAQ. While 2022 has not been kind to NASDAQ, it is a temporary correction in long term view. As true as it may be, the broader Indian market comes a close second to NASDAQ. By 2047 (100 years of modern India’s independence), India will have second most share in the world economy1,2, trailing only China and by 2072 (125 years of modern India’s independence), India will reclaim the top spot.
Similar forecasts of economic growth were claimed for Japan in 70s/80s too, but they did not materialize; then is it any different for India? Yes! Because for most of the history, India has had the biggest share of the world economy. While two hundred years prior to independence may not have been favorable when it reached the bottom, now it is just on its path to – well – mean reversal. Both the timelines mentioned in India’s forecast are much smaller when we zoom out and look at history on timeframe of 2500+ years. It is an analogy to the 2022 NASDAQ correction or 2000 correction as you can see below but it is likely to stay on course its long-term path. China has done well most of the history as well and it is already on the path to increase economic output to the historical mean. India’s ranks may be different depending on how you look at it but there is one thing you cannot deny – its growth.
In addition to strong economic growth and a diverse stock market, the Indian stock market also has favorable long-term growth prospects. India has a young and growing population expected to drive demand for goods and services, and to support economic growth in the coming years. Over 600m Indians are under the age of 28 who were all brought up with access to Internet.
India has emerged as the third largest ecosystem for startups globally, only behind the US and China. As of 7th September 2022, India is home to 107 unicorns with a total valuation of $340.79 Bn. Of these 107, 44 unicorns with a total valuation of $93.00 Bn were born in 2021 and 21 unicorns with a total valuation of $26.99 Bn in 20223. This network is set to accelerate in coming years and contribute significantly to GDP growth.
Moreover, India has exported significant human capital in last few decades all over the world. All these professionals remit money back home making India the richest country in terms of remittances from migrants4. They hold influential positions which help penetrate trade further. This element is one of the most underrated pieces of the puzzle. They also cater to market India’s tourism which is a significantly underdeveloped sector and, is now projected to improve over next few decades as Infrastructure improves.
How does all that translate into returns? Let’s zoom in.
As of Nov 2022, the market’s total capitalization was approximately $3.5 trillion, making it the tenth-largest stock market in the world by capitalization5, 6. The GDP to capitalization ratio is around 100% or higher for other developed countries6. As the GDP is poised to become 30+ trillion USD by 2047 (25-45 trillion USD range), stock market cap will be at least that much. Nifty closed at 18,758 in Nov 2022. It was at 1093 in Nov 2002 while, India’s GDP was approx. $0.5 trillion then. Nifty is up seventeen times in last 20 years. Market capitalization % of GDP was super low at approx. 35% then. It stands at approx. 110% now which still shows room for growth compared to developed markets. Even if we assume, capitalization to stay in this range in 2047, then we could see Nifty at 175,000. Obviously, like any forecast, there are lot of assumptions baked into this one. And hence it will be in the range of 87,500 – 262,000 7.
That’s about broader index which is a handsome return by itself. However, India is one of world’s most diversified equity markets, with sizeable sectors that derive revenues from both within and outside of India. This makes it attractive for investors, especially for stock pickers. Picking star stocks and holding it for long term yields enormous returns. An investment of INR 9,500 in the Infosys IPO in 1993 would have grown to INR 1.563 Bn in 2022. And, we have all heard and read the news of a certain Ravi whose grandfather bought MRF shares in the 90s and after 29 years not only his grandfather came out of coma, but also discovered those shares were now worth over INR 13 Bn8. While these examples may be extreme for most small and mid-level investors, I just want to highlight the benefit of staying invested in Indian market for long term9
As India marches forward to $30+ trillion, every Investor – small or big – can and must grab piece of this growing pie. That’s our vision at Infinity Pool. With our product Shankh, we are democratizing wealth for everyone.
Are you or your family still holding large part of assets through Fixed Deposits or Real Estate? It’s time to ponder whether diversification into financial securities like equities, derivatives, investments into VC/PE/Startups make more sense in the new era. Shankh.tech offers some of these alternatives. The choice is yours.
- Livemint (2022) India to be second biggest economy in world by 2047: Commerce secretary, mint. Available at: https://www.livemint.com/economy/india-to-be-2nd-biggest-economy-in-world-by-2047-commerce-secretary-11662219309468.html
- Service, T.N. (no date) India likely to be $40-trillion economy by 2047: Mukesh Ambani, Tribuneindia News Service. Available at: https://www.tribuneindia.com/news/business/india-likely-to-be-40-trillion-economy-by-2047-mukesh-ambani-453721
- Indian unicorn landscape – startups, growth, FDI, investors (no date) Indian Unicorn Landscape – Startups, Growth, FDI, Investors. Available at: https://www.investindia.gov.in/indian-unicorn-landscape
- Connor, P. (2020) India is a top source and destination for world’s migrants, Pew Research Center. Pew Research Center. Available at: https://www.pewresearch.org/fact-tank/2017/03/03/india-is-a-top-source-and-destination-for-worlds-migrants
- Throwback to when a guy discovered shares his grandpa bought in 1990 were worth rs 130 cr (2021) Indiatimes. Available at: https://www.indiatimes.com/trending/human-interest/when-a-man-found-his-shares-were-worth-rs-130-crore-545548.html
- All India market capitalization: BSE listed stocks market capitalization (no date) All India Market Capitalization | BSE Listed stocks Market Capitalization. Available at: https://www.bseindia.com/markets/equity/EQReports/allindiamktcap.aspx
- List of countries by stock market capitalization (2023) Wikipedia. Wikimedia Foundation. Available at: https://en.wikipedia.org/wiki/List_of_countries_by_stock_market_capitalization
- Forecast based on my mathematical model
- Carter, O. (2022) Did you invest in Infosys IPO in 1993; here is the lesson, Business Update. Available at: https://businessupdate.live/did-you-invest-in-infosys-ipo-in-1993-here-is-the-lesson-99864