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Indian capital markets rise through ranks in global order

Rising through it all
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Rising through it all

The Indian capital markets have moved up in the global pecking order over the past decade. From being one of the least favoured markets for corporate listing way back in, Indian exchanges have moved up the ranks significantly among emerging markets alongside Shanghai’s SSE and Brazil’s Bovespa. This is what a PwC survey has just found

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​ The EM-DM juggle
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​ The EM-DM juggle

Although developed market (DM) exchanges continue to be favoured for listing, their lead over EMs has narrowed significantly since 2011. The dominance of the New York Stock Exchange (NYSE), the Nasdaq, the London Stock Exchange (LSE) and the Hong Kong Stock Exchange (HKEX) is not as great as before, with Indian exchanges, Shanghai’s SSE and Brazil’s Bovespa moving up the ranks, in recognition of the growing maturity of EM exchanges.

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​ Game of dominance
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​ Game of dominance

Looking towards 2030, PwC still expects companies from China and India to dominate issuance, views regarding the leading exchanges have changed dramatically. The same four exchanges, NYSE, Nasdaq, LSE and HKEX, are expected to maintain their leading positions, reflecting their unmatched levels of resilience and liquidity advantages. In 2011, the medium-term view of the top four exchange destinations was very different — with Shanghai in the top spot, Indian exchanges at number three and Brazil’s Bovespa in fourth place.

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​ Who leads capital raising in 2030?
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​ Who leads capital raising in 2030?

In 2011, respondents predicted that the Shanghai market would be the leading exchange globally by 2025, and India and Brazil would follow in third and fourth places. PwC’s current survey places these markets in sixth, fifth and 11th place, respectively. While Shanghai’s popularity has fallen from 55% to 21%, India has also become less attractive despite strong activity levels over the past couple of years.

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What’s buzzing in IPO mart
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What’s buzzing in IPO mart

Although Greater China remains the primary Asian market, India has seen a significant increase in IPO activity after a period of market downturn. India may benefit from concerns by Asian equity investors over the US’s and China’s growing trade rift, as India is less involved in regional supply chains than other major Asian countries such as China and South Korea.

In 2017–18, 335 IPOs raised $17.4 billion, much more than in the prior five years. This is due to several factors. Political stability under Narendra Modi’s government and a positive economic outlook resulted in a number of large Indian IPOs coming to market in recent years, most notably in the insurance sector. Positive changes to the Indian capital market regulations further contributed to IPO momentum.

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​ Climbing corporate governance ladder
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​ Climbing corporate governance ladder

When it comes to concerns about corporate governance, EMs are increasingly paying attention. Vikram Limaye, Managing Director and CEO of the National Stock Exchange of India, says strengthening governance has been a focus area for Indian regulators and government, citing the recent Kotak Committee report’s recommendations, which “are being implemented as we speak.” He says there is an increasing awareness that corporate governance lapses “will not be taken lightly,” but concedes “we still have a long way to go.”

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​ Breeding ground for issuers
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​ Breeding ground for issuers

India came second in terms of issuers, but third in terms of capital. As per the data China and India continue to lead, although their expected importance has diminished substantially, which may be attributable to greater recognition of political realities and constraints in those two key markets, as well as, possibly, increased investor interest in the broader region

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