Budget 2025: The Economic Survey, tabled by Finance Minister Nirmala Sitharaman, noted that the Indian capital markets have demonstrated strong performance, driving capital formation in the real economy despite geopolitical uncertainties and election-driven market volatility challenges.
The annual survey noted that the performance of capital markets shows increasing the financialisation of domestic savings and supporting wealth creation.
"The capital markets have demonstrated strong performance, driving capital formation in the real economy, increasing the financialisation of domestic savings, and supporting wealth creation. As of December 2024, the Indian stock market has recorded new highs, consistently outperforming its emerging market peers despite geopolitical uncertainties and election-driven market volatility challenges. Meanwhile, the insurance and pension sectors continue to perform with the vision of achieving universal coverage and strengthening the financial ecosystem further," the annual survey, reviewing the FY2024-25, stated.
The survey showed that despite market volatility and geopolitical uncertainties, the primary markets experienced increased listing activities and investor interest in FY25.
As of the end of December 2024, the BSE market capitalization to GDP ratio had increased significantly over the past decade, reaching 136 percent. This growth can be attributed to various factors, including the strong profitability growth, rapid adoption of digital financial infrastructure, expanding investor base, and significant reforms in products and processes in the Indian stock market.
The number of investors in capital markets has been steadily increasing, from 4.9 crore in FY20 to 13.2 crore as of December 31, 2024. This upward trend, coupled with active listing activities and recent regulatory measures by the Securities and Exchange Board of India (SEBI) to address excesses, is expected to support a sustainable expansion of the market.
India's global IPO listing share rose to 30% in 2024, up from 17% in 2023, solidifying its position as the top contributor to global resource mobilization. From April to December 2024, the total resource mobilization from primary markets (equity and debt) reached Rs 11.1 lakh crore, a 5% increase compared to the entire FY24.
It added that India's share in global IPO listings surged to 30% in 2024, up from 17% in 2023, making it the top contributor to primary resource mobilization globally. Over the long term, Indian markets have been among the best-performing worldwide, with the Nifty 50 delivering a compounded annual return of 8.8% over the past decade. While it trails behind indices like the US NASDAQ (15.3%) and Dow Jones (9.2%), it outperforms China's Shanghai Composite (3.2%). The strong performance of Indian stocks is driven by profitability growth, digital infrastructure, an expanding investor base, and substantial reforms. India's weight in the MSCI-EM index reached a new high of 20% in July 2024, settling at 19.4% by December, ranking third after China and Taiwan.
The Economic Survey stated that a substantial decrease in equity markets could negatively affect sentiment and decrease spending among India's retail investors.
The survey highlighted that the participation of retail investors in India's equity markets has surged to record levels, with many newcomers joining post the COVID-19 pandemic and lacking experience in handling significant and prolonged market corrections. The survey pointed out that a potential correction in the market could have a notable impact on sentiment and spending.