India’s economy set to soar to $30-35 trillion by 2047, promising big gains for equity investors

Analysts predict a strong stock market ecosystem in India by 2047, supported by favourable demographics, technological progress, and economic expansion, making it an ideal destination for investment. Manoj Bahety, Founder & Fund Manager, Carnelian Asset Management & Advisors, says, “Investing in India today is a once-in-a-lifetime opportunity. The most important mega-trend is the demographic dividend, which will drive structural changes across sectors. India will contribute around 25% to the incremental global workforce and remain the youngest country for the next 30 years.”

This demographic dividend will lead to a consumption boom, presenting India as a global wonderland of industry and commerce. All these bode well for the Indian stock market, which is expected to undergo significant changes in terms of policy, and technology, and will see greater participation from smaller cities by 2047, when India celebrates its centenary of Independence.

Tech Advancement

Technology will play a crucial role in driving innovation in the Indian market. It will make transactions easier and cheaper, attracting more investors. “Increased algorithmic trading will make markets more efficient. As India’s share of the world GDP grows, there will be more global integration, enabling seamless cross-border trading and investment,” Bahety says.

For data analytics and security, Rupen Rajguru, Head of Equity Investments and Strategy at Julius Baer India, says, the exchanges may use AI and blockchain technology. Gurpreet Sidana, CEO of Religare Broking, expects blockchain to revolutionise settlements by 2047, making them faster and more secure. And, quantum computing could unlock unprecedented analytical power, while virtual and augmented reality may transport investors to immersive trading experiences.

Over the years, India’s stock trade settlement cycle transitioned from T+5 (or trade plus five days) to T+1 in 2021. In fact, currently, the beta version of same-day settlement (T+0) is available for 25 stocks. “Going forward, instant settlement can come into play. Technological advancements can also help in developing voice-based trading platforms and real-time resolution of client queries,” says Sarvjeet Singh Virk, Co-founder and MD of Shoonya by Finvasia.

Rajkumar Singhal, CEO of Quest Investment Advisors, predicts that the investing community, stock exchanges, and regulators will all embrace AI and machine learning. “Investors will use them for predictive analytics and algorithmic trading,” he says.

Market Drivers

There are three key factors that have a significant impact on equity markets: sentiment, liquidity, and fundamentals. The first two influence short-term performance, while the fundamentals determine the long-term trajectory of the market.

The market has been surging ahead for some time now, thanks to a stable government at the centre and a rising economy, among other factors. Government, corporate, and household balance sheets in India are all strong, which, according to Rajguru, has kick-started a strong economic cycle.

Another factor likely to significantly impact the stock market is the financialisation of savings into equities. Currently, equity accounts for just 4% of household assets in India, compared to around 11% in the US. “We expect equity weight to increase to 10% over the next decade, resulting in an inflow of $2 trillion, which is substantial compared with current market cap of $5 trillion,” says Bahety. And, this inflow, coupled with other factors mentioned earlier, will help increase the size of the Indian market substantially.

Size, Composition

The Indian market is currently placed fourth globally in terms of market cap, and is projected to climb to the Top 2 by 2047. With India’s corporate profits expected to grow 16 times to $2.5 trillion, Bahety anticipates India’s market valuation to expand to $50 trillion by 2047. New regulations will likely be put in place to deal with the growing complexity and size of stock exchanges, he adds.

At present, domestic capex—government, through infrastructure development; corporations, by way of setting up new plants; and households, by way of real estate investment—is a visible trend. Analysts believe this will also start reflecting in the indices.

In the medium term, Rajguru expects more stocks from the manufacturing or capex theme and new-age tech companies to become a part of the Sensex and Nifty as their profitability rises.

The rise of new-age tech firms could lead to an increasing number of IPOs going forward, says Nikhil Rungta, Co-Chief Investment Officer-Equity, LIC Mutual Fund Asset Management.

As is the case in today’s developed markets, by 2047, the indices may see larger representations from sectors such as green energy, consumer, technology and technology-enabled services, and digital companies, says Singhal of Quest. The economy and indices would benefit greatly from leadership in AI, blockchain and IoT.

With advanced technology, Sidana of Religare believes that investing will be more accessible. “We may see fractional ownership of everything from art to real estate, making investing more accessible.” Shoonya’s Virk adds that investment options will be more focussed on small investors as retail investments are skyrocketing.

Markets in Amrit Kaal

The Sensex and Nifty are expected to continue their upward trajectory over the next two decades, driven by robust economic growth, rapid urbanisation and technological innovations. Vinod Nair, Head of Research at Geojit Financial Services, says, “India has started to experience better than average corporate growth in the last two to three years. This is expected to grow in the coming decades in anticipation of new reforms and an increase in private and government spending.” The Sensex has been generating a nominal return of 12-13% in the past 10 years, which can be expected to continue, he adds.

Virk believes the Sensex, in the next two decades, can zoom above 250,000, gaining over 200% from the current levels of 80,000. Sharing his view on the markets, Bahety says more wealth is made when you are in the right ship with tailwinds. “India is in the right ship. Our advice to investors is to stay in the ship patiently while avoiding short-term temptations,” he says. 

@iamrahuloberoi