India has built one of the world’s largest and most technology-driven capital markets, but its next big challenge is ensuring that its rapidly growing retail investor base is protected from excessive speculation and misleading advice, according to Ashish Kumar Chauhan, MD & CEO of National Stock Exchange of India (NSE).
“What we try to do in India is to keep our products simple,” he said, adding that products are designed with retail investors in mind so that their money is directed more towards investment rather than speculation.
With 13.7 crore unique investors and 27 crore accounts, India has become the world’s fourth-largest market after the US, China and Japan. Chauhan said the country’s market has a distinctly retail character, making investor safety and corporate governance increasingly important.
India has already made significant progress in building market infrastructure. Chauhan pointed to the country’s early adoption of the T+1 (Trade date plus one working day) settlement cycle and its use of electronic trading, real-time risk management and depository systems as examples of how Indian markets moved quickly to adopt technology.
The next phase, however, is about creating safer products and reaching more investors. NSE has launched electronic gold receipts, allowing investors to deposit gold and trade it in a manner similar to shares. If the model succeeds, it could eventually be extended to other metals and physical commodities.
At the same time, the rise of financial influencers has created a new challenge. While they can bring more people into the markets, Chauhan warned that some may mislead investors. “Retail investors are not able to differentiate between a valid, what I call legitimate activities like television channel vis-a-vis somebody telling them some sort of very fantastic stories,” he said.
Chauhan said India’s growing investor base is itself a remarkable achievement. Despite relatively low per capita income, the country has built a capital market that reaches almost every part of the country. The focus now is on better channeling the country’s growing savings into investments that can support India’s economic growth.
On the possibility of tax relief for foreign portfolio investors, Chauhan remained neutral, saying strong economic growth is ultimately a bigger draw for global capital than tax incentives alone. “A country which is growing, anyway people will invest,” he said, adding that any tax relief would simply act as an additional sweetener.
Looking ahead, Chauhan said NSE’s fortunes are closely linked to India’s economic growth. Lower oil prices and an easing of geopolitical tensions could provide a stronger backdrop for the country. His broader view remains simple: “Whatever is good for India is good for NSE.”
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