India is one of the fastest-growing economies in the world. The country has seen vibrant innovation in the Fintech space, the digital economy has taken off after the demonetization drive 4 years back. It is also seemingly well on its way to becoming an economic superpower. Ms. Lakshmi Iyer, President & CIO-Debt & Products, Kotak AMC Ltd, who spoke at the recently concluded Femvest 2021 virtual summit on women’s financial empowerment, held forth on the topic 'Resurgent India: The Next Global Hub of Financial Services', and demonstrated how India is also poised to be a financial services superpower.
The year 2020 was an ‘expect the unexpected’ kind of year where India experienced the longest lockdown in its history. Towards the end of the year, the global economy has rebounded strongly. That is reflective of the fact that sentiments have started to bounce back too.
Considering broadly the balance sheets of the world's various central bankers, be it the USA, Bank of Japan, or Eurozone, everyone had inflating balance sheets. “2020 was the year of malnourishment, when there was a malnourished economy. We had to ensure that steroids were pumped into the blood of the economy to ensure that there is a pump driving effect. This has started to show its results in the early part of 2021,” remarked Ms. Lakshmi.
There was also excess liquidity that can be seen, which was supporting the broader markets. Which is why the sentiments are positive, followed by the flows. And fundamentals initially took a backseat and towards the later part of 2020, they started picking up steam. “The reason this is happening is that the world over there is almost 25 – 27% of the total bonds outstanding. These are giving negative yields, so the money has started chasing,” explained Ms. Lakshmi.
When it comes to the Indian economy, Ms. Lakshmi stated that the recovery in India was getting broad-based. Looking at power consumption, there was growth, there was growth also in goods and services tax collection, and there was a pickup consistently every month. This explains why sooner or later India is likely to see a slightly more broad-based recovery, which is enticing many foreign investors.
“Looking at the Business Resumption Index by Nomura, the number shows an uptick in the overall business trends. The reason being, India has been able to steer clear of the second wave of the pandemic, which gripped the world. Clearly, the country is showing signs of plateauing out. This is in contrast to some of the Western countries, which are grappling with the massive second wave. India seems to be slightly more resilient because of its policies, and preventive measures taken earlier,” added Ms. Lakshmi.
In the stocks listed in the stock exchanges, the percentage of ownership of foreign portfolio investors is rising. “At this pace, if the foreign investors keep buying, domestic investors are pretty happy selling to foreign investors and stakes are going up. India is an idea whose time had come, and is likely to continue for the foreseeable future,” exclaimed Ms. Lakshmi.
Comparing the Indian population, the number of insurance policyholders, etc. to the mutual funds' investors, the latter is merely 2 crores. Based on this information, Ms. Lakshmi stressed on the need for participation in the capital markets. She concluded the session with a question: “If foreigners can participate in the India story, why cannot we Indians?” Indians must participate in the boom that India is at the cusp of. In the emerging market pack once upon a time, India used to be called the fragile five. It is no longer the case, as it is the formidable one, a financial services superpower, and the torchbearer to take the world forward.
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