Domestic investors to drive market in next decade

New Delhi: Indian investors will drive stock markets over the next decade as  appetite for equity investing is growing in the country, according to Morgan Stanley.

The global investment firm said that for over two decades, foreign investors have been the largest stakeholders of Indian equities. “While that remains the case, domestic institutions have been driving up incremental equity demand in recent years,” said Morgan Stanley in a report identifying 10 most disruptions for the coming decade for equity investors in India.

Morgan Stanley said that it expects domestic equity mutual funds, insurance, provident funds, and the National Pension System to size up and simultaneously drive equity saving over the next decade.

“Our bottom-up model of these three channels suggests even higher equity saving expansion, rising $450 billion to $550 billion by FY28. From a top-down perspective, we expect equity saving to equate to 1.3 per cent of GDP by FY28 (higher against the three-year average of 0.5 per cent),” it said.

Morgan said that India is among the few large economies with a younger-age demographic trend. “Appetite for equity investing is growing, unlike the 1992 to 2011 trend, when the ratio of equity saving to GDP was continuously falling. We see this coinciding with India’s young working population — younger people are in a better position to make long-term investments as well are more amenable to taking risks,” said the report.

It said that regulations initiated in recent years should also foster a trend toward increasing equity savings. These include tightening of norms governing market participants, to strengthen scrutiny; higher compliance as regular reporting of information and disclosures and regulatory changes.