Essential components shaping the brand new progress curve of capital markets

Final week, the FICCI hosted a day-long Capital Markets Convention. There was a uniform view that our markets are coming into their subsequent part of progress. The important thing query was: what are the weather that may form this new progress curve? On this article, I’ll talk about a few of the pillars that may drive this subsequent part.

Over the previous three many years, India’s inventory markets have emerged as a few of the most liquid, dynamic, and vital on this planet. As of the top of 2024, our market capitalization had surpassed roughly $5.1 trillion. The previous couple of years have seen a dramatic transformation. Since 2019, the variety of demat accounts has surged from 40 million to over 150 million by mid-2024 — an almost fourfold enhance. Retail participation has been additional strengthened by the rise of SIPs (Systematic Funding Plans) and the speedy growth of the mutual fund business, which is now reaching smaller cities and cities.

Over the subsequent 5 to seven years, markets are anticipated to double in measurement. This progress shall be pushed by general financial growth and the formalisation of the financial system, which is predicted to channel $7–12 trillion of financial savings into the monetary sector over the subsequent decade. A good portion of this may probably move into our well-established capital markets. To channel this progress constructively, I imagine we have to concentrate on a couple of vital areas.

Deepening the Secondary Fairness Market with Numerous Merchandise

Over time, India’s fairness markets have matured significantly. To soak up the rising flows into the market, we should broaden the product suite. This consists of ETFs, index funds, REITs, and InvITs, which can assist create a stronger, extra inclusive funding panorama.

ETFs and Index Funds: Property below administration (AUM) in ETFs have risen greater than fivefold since 2020. But, ETF penetration in India stays considerably under international benchmarks. These low-cost, passive merchandise can deepen participation and broaden entry. Additional diversification into asset courses similar to gold, silver, commodities, and different monetary devices can improve market resilience.

REITs and InvITs: The mixed AUM of InvITs and REITs has surged to almost $100 billion in FY2025, greater than doubling in simply 5 years. InvITs account for roughly 75% of this pool. Globally, REITs and InvITs handle over $2 trillion in belongings. In India, nonetheless, REITs cowl solely about 10% of the entire listed actual property worth—in comparison with greater than 90% in developed markets just like the US and UK. This hole indicators monumental progress potential.REITs and InvITs are evolving into mainstream financing platforms for infrastructure and actual property. Their scope is increasing past conventional workplace and highway belongings into new segments similar to warehouses, resorts, hospitals, telecom towers, renewable vitality, and digital infrastructure. With coverage help—similar to Small & Medium REITs, increased mutual fund participation limits, and equity-like classifications—the sector can obtain broader investor entry and liquidity.Given India’s infrastructure funding wants, creating these platforms additional is not only a possibility; it’s an crucial.

Stablecoins: The Subsequent Wave of Fintech Innovation

The GENIUS Act within the US has given stablecoins international legitimacy by mandating 1:1 backing with liquid belongings, guaranteeing transparency and AML safeguards, and prioritizing holders in chapter. This daring transfer pushes stablecoins from the crypto fringe into mainstream finance.

India’s fintech ecosystem, constructed on a sturdy digital public infrastructure (Aadhaar, UPI, Account Aggregator, IMPS, NEFT, RTGS), can undertake an identical framework. By regulating permissible issuers, implementing full reserve backing, and mandating common audits and disclosures, India can create a protected, scalable, and controlled stablecoin surroundings alongside its Digital Rupee initiative.

In parallel, enabling the buying and selling of historically illiquid belongings on digital platforms can unlock productiveness and broaden monetary participation.

A Unified Regulatory Coordination Framework for Sooner Resolution-Making

At present, regulatory coordination within the monetary sector is overseen by the Monetary Stability and Growth Council (FSDC), which incorporates the RBI and SEBI however lacks the essential participation of the Ministry of Company Affairs (MCA). Given the MCA’s vital function in company governance, shifting in direction of a extra unified discussion board that features the MCA alongside the RBI and SEBI might assist create a complete and cohesive oversight mechanism, masking company regulation, banking supervision, and capital markets.

Such an association might assist cut back regulatory gaps and overlaps, enhance inter-agency coordination, allow extra well timed responses to rising dangers, and improve oversight in areas similar to fintech, company governance, and danger disclosure. This built-in regulatory framework might additional help ongoing reforms and assist India’s monetary ecosystem adapt to speedy market developments.