Which asset class can replace equities, real estate and gold by 2047? Religare Broking CEO Gurpreet Sidana explains

Benchmark equity index BSE Sensex has surged more than 20 times in the past 24 years. The index soared to 81,921 on September 10, 2024, from 3972.12 on December 29, 2000. Likewise, the precious metal gold soared nearly 17 times to 73,855 per 10 gram during the same period. So, what can investors expect from the next 23 years of this Amrit Kaal? Which asset classes will outperform? In an interaction with Business Today, Gurpreet Sidana, CEO, Religare Broking, shared his insights. Edited excerpts:

BT: What kind of return can we expect from Sensex for the next two decades?

Sidana: Over the next two decades, the Sensex is expected to continue its upward trajectory, driven by India’s robust economic growth, rapid urbanisation and technological innovations. With a projected GDP growth rate of 6.5-7.5% per annum, a CAGR of 12-15% is anticipated, fuelled by increasing domestic consumption and investment, a rising middle-class population, government reforms, technological advancements and growing global investment. While past performance is not a guarantee of future results, the Indian stock market’s resilience and growth potential make us optimistic about its future prospects. Investors can expect persistent and superior returns, subject to economic cycles and unforeseen events.

Q: How big will be the Indian stock market and how regulations will change by 2047?

Sidana: Currently, India’s market capitalisation ranks fourth globally and it is expected to be among the top two by 2047. Looking ahead, the Indian stock market is expected to grow with the potential to reach a market capitalisation of $40-48 trillion by 2047. This growth is based on the assumption that India’s GDP will reach to about $25-30 trillion by that year and the market cap-to-GDP ratio will increase from 1.3 to 1.6.

The goal of regulations is always to create an efficient market environment; while safeguarding interests of the investors. While the regulatory framework for the Indian stock market is already robust, we expect targeted reforms for orderly and advanced market places, simplified bylaws and reduced compliance burden. By 2047, it would not be a surprise, if we see introduction of a regulatory sandbox for companies willing to test new trading models in a controlled environment.

Q: Which sectors will take over as investment options by 2047?

Sidana: By 2047, investment opportunities in India will likely be dominated by sectors such as electric vehicle (EV) manufacturing, battery technology and charging infrastructure, as the country shifts towards electric mobility. Additionally, digital payment platforms, fintech and cyber security will thrive as digitisation of payments infrastructure advances. Infrastructure development, particularly in high-speed expressways and smart cities, will also attract significant investment. Furthermore, sectors like e-waste management, renewable energy and sustainable manufacturing will gain traction as the country focuses on reducing emission intensity. We also believe agriculture technology, farm mechanisation and skill development in emerging industries will also be attractive investment segment, driven by the government's emphasis on increasing farm output and youth skilling. Thus, the sectors that are likely to take over by 2047 would be technology, automation, digitalisation and sustainability.

Q: Do you think traditional investments like equities, real estate and gold can be replaced by other investment options in the long run?

Sidana: In the long run, investment options will diversify and become more sophisticated. Traditional assets like capital markets, real estate and bullion will continue to hold value, but alternative investments such as cryptocurrencies, ESG funds and impact investing will gain prominence. Technology will enable greater access to global markets, and AI-driven robo-advisors will offer personalised investment strategies. Additionally, tokenisation of assets could allow fractional ownership of everything from art to real estate, making investing more accessible. Overall, a wider array of investment options will cater to varied risk appetites and financial goals.

Q: How will stock exchanges and technology change over the next two decades?

Sidana: By 2047, Indian stock exchanges may evolve where AI-led machines engage in a ‘Star Wars’ like battle for trading supremacy. The exchanges may create separate marketplaces, where humans and machines transact in different segments, both catering to the needs of distinct client expectations and risk mitigation. It will be fascinating to see how the exchanges and regulators tackle issues of market manipulation by advanced trading models comprising artificial intelligence and machine learning.

Additionally, we can also expect blockchain technology to revolutionise settlements, making them faster and more secure than ever. Quantum computing could unlock unprecedented analytical power, while virtual and augmented reality may transport investors to immersive trading experiences. Biometric security and advanced cryptography would protect markets against cyber threats.

While all these advancements hold greater promises, they also bring new challenges. Ensuring ethical AI, preventing risks, and remaining regulatory compliant will be crucial for a fair and resilient market. Yet, all this could be merely scratching the surface of what's possible; the actual innovations and breakthroughs are beyond our current imagination in 2024.

Q: Which factors will continue to impact or will impact Indian stock markets?

Sidana: By 2047, we foresee a resilient stock market ecosystem in India, backed by favourable demographics, technological advancements and economic growth. With the recent pace of reforms in digital, infrastructural and financial inclusion parameters, we believe India is at a sweet spot of becoming a global economic power with a vision for highly competitive global enterprises at home.

India’s population is projected to exceed 1.6 billion by 2048, surpassing China and the US. With the largest pool of working population here, we are likely to turn into an “office for the world.” Thus, factors such as rapid urbanisation (assuming, over 50% population would be living in urban areas) and rising disposable incomes (with per capita income exceeding $15000, nearly 6X the current value), we can drive massive consumer demand and economic growth.

As financial literacy and digitisation would continue to improve, we assume over 40%-50% of the population in India will be financially literate (as compared to 27% today), resulting in 20%-30 % investors participation in the stock market.

The younger demographic (comprising over 50% of the population) will increasingly rely on digital platforms for trading and investment, accelerating the adoption of AI-driven financial technologies. Moreover, the growing importance of ESG factors, driven by an environmentally conscious population, should reshape investment strategies with sustainable and ethical investments potentially accounting for a sizeable market portfolio.