India’s stock market stands apart as an enabler of mass prosperity
Tata Motors and Mahindra are worth more in market capitalization than Maruti Suzuki, and may also outsell it in the auto sector. Diversity: Atmanirbharta or self-reliance means India has companies in many sectors (rather than a few selected for competitive advantage), diverse consumer markets (mass production with localization) and a large services sector (with higher employment elasticity than manufacturing).
We have less concentration than Korea (where two big electronics companies are more than 20% of its market cap), Taiwan (TSMC alone is 25%) and Saudi Arabia (where 80% of its $2.7 trillion market cap is on account of Aramco), since our biggest company Reliance equals only about 6% of India’s market cap. Our sectors are widely distributed across financial services (at 33%), technology (14%), oil and gas (14%), consumer goods (9%), automobiles (7%) and pharma (4%).
Unlisted inventory migrating to the stock market will further increase diversity; Ola and Ather are global technology leaders in electric scooters, Paperboat is outrunning the global cola duopoly and Manipal Hospitals is breaking ahead. Institutionalization: India’s democracy, with its checks and balances, has blunted widespread crony capitalism.
Institutional ownership of shares has risen from 10% in 1991 to 35% today, with a near doubling of equity holdings by Indian institutions from 8% to 15%. Corporate India now has less debt, less diversification, less unification of shareholder and executive roles, superior capital allocation and stronger boards.
These combine with strong regulation of capital markets and banking to drive superior returns on capital; Nifty’s return-on-equity is a healthy 14%, while Korea and China are below 10%. India’s 80% premium
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