Retail ownership of Indian equities up 800bps in a decade: Morgan Stanley

According to a recent report by Morgan Stanley, retail investors in India have emerged as a significant force in the equity market, with their ownership rising by 8%, or 800 basis points, to 23.4% over the last decade. The firm expects this trend to continue, driven by India’s demographics, policy framework, investor education, and positive real rates, which will fuel the growth of equity investments. Only 3% of Indian households' balance sheets are invested in equities, excluding founders' holdings. This figure could rise to double digits in the coming years. Despite the likely moderation in equity market returns over the next decade, the overall wealth created over the past decade, US$ 8.5 trillion, has seen a significant portion 11% come from equities. Morgan Stanley predicts that with equity issuances rising and a capital expenditure cycle on the horizon, Indian equity markets will see new highs in the next five years.

Corporate earnings in India are expected to grow, supported by a rise in private capital expenditure, corporate balance sheet leverage, and increased discretionary consumption. With a forecasted earnings compound annual growth rate (CAGR) of 18-20% over the next four to five years, the market is poised for further growth. Additionally, India's inclusion in global bond indices and strong track record in private equity and venture capital will continue attracting foreign investors. However, risks remain, including capacity constraints in infrastructure sectors, geopolitical uncertainties, and challenges from artificial intelligence and climate change. Market valuations, particularly for small and mid-cap stocks, appear stretched, and any global economic slowdown or spike in oil prices could negatively impact India’s growth prospects.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.