Founder of Kotak Mahindra Bank and banker extraordinaire, Uday Kotak, said that India is transforming into a nation of investors from a nation of savers. He highlighted that interest in markets improved after the global financial crisis and many of the savers are now seeing the joys of investing. He also gave a lowdown on how to sustain the growth story.
Uday Kotak in a post on social media shared his ‘year-end musings’. “India is transforming from a nation of savers to investors. The tussle between the saver/borrower and issuer/investor model is underway,” he said.
He explained how in the early 80s, the Indian savers had low confidence in financial assets and favoured gold and land instead, before the perspective changed and the savers moved some part of their savings to bank deposits, UTI and LIC.
Investing in equities was considered “speculative” even in the 90s, said Kotak. “Hence companies looking for capital went to the foreign institutional investor (FII). FIIs saw potential and bought into companies while the Indian saver stayed away. Companies raised capital through the less known Luxembourg stock exchange. India’s capital market was being exported,” he said, adding that some highlighted this phenomenon to SEBI.
Kotak said that the Indian savers’ interest in the markets improved after the global financial crisis. “That saver is now savouring the joys of investing. Mutual fund platforms, cash equities and derivatives markets, insurance funds, global private equity in India, other platforms like AIFs, lower tax regime for equity, have all converted a saver to an investor,” said Kotak.
The ace banker also gave a lowdown on how to sustain the growth story. He said that India must avoid bubbles through policy, regulation, education and supply of quality paper. Kotak gave the example of Japan’s Nikkei Index that peaked in 1989 and 34 years later is still below that peak.
Kotak said India must avoid tax arbitrage in debt, relook double taxation on dividends, look into low cost leverage through derivatives, avoid retrospective tax, focus on acquisition financing and streamlining of insolvency/NCLT process. He also said that the corporate sector should move to capital markets from banks,
“As India aspires, the financial sector will be the key engine for delivery. Impact of technology is a separate subject of discussion for a future date. The saver/ borrower and the issuer/ investor models will coexist. It is time for a wholistic financial sector view,” said Kotak.
Meanwhile, benchmark stock indices Sensex and Nifty hit record highs with BSE zipping past 72,000 mark and NSE topping 21,600 level. Analysts believe that these indices could mark new highs in 2024. They believe that the domestic economic growth would remain robust in 2024 due to domestic consumption, government spending, and a gradual recovery in private investments. Events such as the 2024 Lok Sabha elections, first Union Budget post elections in the domestic context and Fed rate cut, geopolitical issues, US elections, global inflation might influence the domestic stock market.
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