In a report titled ‘Indian Capital Markets: Driver of Growth During Amrit Kaal’ released on Monday, Assocham recommended easier market norms, along with support to smaller companies and encouraging them to list on stock exchanges to further strengthen the capital markets of India. It also batted for the relaxation of rules in commodity markets and the extension of trading hours for equity markets.
Assocham said currently the market-cap to gross domestic product (GDP) ratio of the US is 2:1. “If India’s GDP is to reach $40 trillion in 2047, to achieve the USA 2:1 ratio of market-cap to GDP, India’s market capitalisation needs to grow to $80 trillion,” said the lobby group. “This implies a CAGR in market capitalisation of about 14% in the next 24 years.” Currently, India’s market capitalisation is $3.5 trillion, which is almost equal to its GDP.
Assocham observed that the trading hours in India were already less in comparison to other global markets. Indian equities and derivatives are currently open for trading between 9:15 a.m. to 3:30 p.m.
“A larger window for trading ensures better liquidity and better price-discovery by factoring in developments in other markets on a real-time basis,” said Assocham. “With ever-increasing global market integration, there is a need for alignment between domestic and global markets in terms of marketing standards and practices. Therefore, an extension of market trading hours for domestic exchanges could be a step in this direction.”
The industry chamber also called for reforms in the evolving green bond market in India as such issues become a major part of the global capital market ecosystem. The report said issuers and investors of green markets continue to face several challenges in its adoption.
“The absence of a global and legally recognised definition of ‘green’ has presented several roadblocks,” the report said. “A green taxonomy is a classification system that defines which economic activities and assets are environmentally sustainable, without which the possibility of ‘greenwashing’ has posed one of the biggest deterrents.”Assocham added several countries have published their own green taxonomy while in India the same is still in progress. “It would not only help banks and financial institutions to better-assess climate risks in their loan portfolios but also open the segment to financing by overseas investors.”