Future of Indian Stock Market
Sensex might cross a major one lakh mark within next five years also some of the great investors out there on dalal street expect the sensex to cross a major 2 lakh mark by 2030. well after going through all these statements i just wonder that there might be some long-term drivers that will actually fuel the economy those drivers these investors are betting on and we retail investors are totally ignoring because do you know what’s the current problem is that nifty moves a 500 points and we just start panicking that is nifty in overbought zone should we buy nifty for long term this is the biggest problem because of these short term movements we are totally ignoring the bigger picture the story that is yet to be written the story these big investors are really betting on so that’s why guys lana has decided to come up with this particular video in which we together try to discuss some of the long-term drivers of the indian economy that will equally be reflected in the growth of indian stock market the only
aim of this blog is to together develop a long term vision on the india’s growth story
Evolving Consumer Attitudes
Now to start off with this point we need to discuss a very interesting fact that we recently came across now do you know there is something called a magic number in the world economics and this magic number is called the dollar 2000 per capita gdp mark now according to this microeconomic theory whenever a country’s per capita gdp crosses a 2 000 mark the country experiences a next level growth in its gdp the growth that it has never experienced before and that’s why this 2000 per capita gdp mark is also referred to as the acceleration point by various economies so let’s just look at some example to actually witness this
acceleration point china received the two thousand dollar per capita gdp in 2006. post which for the next 10 years its economy grew at 15% per year a similar trend was seen in various other economies which encountered an inflection point once their economies touched a 2 000 per capita gdp mark and the countries were taiwan south korea vietnam thailand you can just see that whenever the country’s per capita gdp crosses at 2000 level mark the growth that they experience is just next level now you might be wondering then why this usually happens well this is so because whenever a country’s per capita gdp increases the consumption pattern in that particular country experience a drastic change the consumers in that country start spending on the discretionary items like automobiles holidays clothing etc and that’s why such expenditure on the discretionary items just drive the consumption pattern of the economy to the whole new level and we have a good news for you india recently crossed a 2000 per capita gdp mark so it might be possible that we are just at the beginning of this growth the growth that we might experience in the future so the
Favorable Demographics
Fact that youth population are the building blocks of our nation but i need to present you a very important research that we recently came across now this was a research that was conducted by national bureau of economic research now this research found out that a 10 increase in share of population over 60 years can reduce the country’s gdp by five percent like can you believe it if the ten percent population of sixty years of age group increases the country’s gdp can actually reduce by five percent and one of the great life example is japan that how the aging population of japan is actually de-accelerating the growth of gdp of japan but fortunately in india the winds are in our favor. In a research it was stated that even by 2030 37% of the population will remain in the age group of 25 to 49 years that means that our population will be younger than both u.s as well as china what is even better that while this 37 percent of the people will remain in the workforce another 16 percent of population who are in the age group of 15 to 24 will be ready to work hence the india’s demographic is such that it can actually support the long-term growth for the india for a very very long period of time and it’s very good for the stock market point of view because as more and more people will be in the working force they will definitely develop the savings as well as investment habit and stock market can actually emerge as one of the main driver of savings and investment for these working population
Technology and Innovation
We all knew for a fact that advancement in information technology is right there sitting at the heart of the country’s growth take for example US the FAN stocks that is the facebook the amazon the apple the netflix and the google together constitutes 19% of the S&P 500 index so can you believe this one fifth of the nation is actually driven by five technology companies however this is not the case with india if we look at the IT sector contribution to the country’s gdp it just turns out to be 7.7% which is very very less in compared to the advanced nations but but but the picture seems to be changing now with the advent of the startup culture and growing millennial population the innovation rank has jumped from 81 to 48 in just five years also have a look at how disruptions during covid has actually accelerated the trend even further this shows the vc fundings of indian startups so the amount of funding that indian startups have raised recently is around 22 billion dollars well if we look at the combined fundings that they have raised in the previous five to six years it just turns out to be a mere 15 billion dollar so can you believe it the total amount of funding that the indian startups have raised recently is more than the combined fundings that they have raised in the previous five to six years so guys we know for a fact that how developed economies are actually driven by the technology companies and this technology wave is just starting in india so as it’s not always about you know TCS moving five percent is it overbought or not zomata moving ten percent and all the picture is really big the tech story is really big in india and you need to develop a long term vision to actually realize the power of this tech story
Urbanization
Simple definition of urban area is that a city or a place where more than 75 percent of the population is actually employed in the non-agricultural activities this urban areas are referred to as the driver of growth for the modern economy china is a shining example of this that how urbanization process actually drive the economic growth of the country china rapidly urbanized from 26.4% in 1990 to 59.2% today making china a second largest economy in terms of nominal gdp now the good thing is that similar pattern is visible in the indian scenario where by 2050 50% of the population will reside in the urban areas of the country now of course the obvious question arises that how urbanization can be a driver of growth for the country well this is so because if we talk about the 2016-17 data 42.7% of the total indian workforce was employed in the agricultural and allied activities but do you know for a fact that this 42.7% of the workforce only contributed just 17 percent to the gdp so this might be possible that urbanization process will actually lead to systematic distribution of this workforce into actual productive areas and the growth that the country will witness will be a holistic growth also this urbanization theme is so prevalent that recently various fund managers have just came out with a fund based on urbanization theme
Income Growth
Income growth is one of the most basic microeconomic variables that usually we as an investor look after for but before actually moving to the income growth scenario of the country we need to present you a very interesting case of how compounding works in case of economies now for india to become a 1 trillion economy it took a massive 58 years however then to become a second trillion economy it took just 7 years now india is almost a 3 trillion economy and it just took 5 years to achieve that mark looking at the current growth rate scenario we should take less than 4 years to hit another 4 trillion mark now the good thing is that increase in gdp is equally supported by increase in the income level of the population in 2018 the upper middle income growth and high income growth comprises of 24 of the total population now interestingly this 24 percent of the population drives 60 percent of the consumption pattern of the country now what’s more interesting is that this 24 percent will become a major 51 percent of the population by 2030. now at this point of time i just remember mr ramdev agarwal sir who rightly mentioned that as personal income of the consumer increases it doesn’t mean that they will start eating more it means that once their basic necessities are fulfilled consumers will move towards discretionary spending as well as savings and investment while talking about savings still 84% of the total wealth of indians are in the form of real estate while remaining 11%is in the form of gold only 5 of the total wealth of indians is in the form of financial assets and guys we know for a fact that only two to three percent of our indian population actually is exposed to indian stock market and this got to change in the future
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