The financial capital of India, which boasts of the 10th largest stock exchange of the world and HQs of multibillion-dollar corporations, is also an example of the crumbling infrastructure of India. On the one hand, investors are appealed by the country’s promise of an outstanding domestic consumption growth story and on the other, they have to face constant governance challenges, poor regulatory frameworks, policy flip-flops, and under-performing sectors.
The government led by Narendra Modi has been leading steps to reignite the engines of growth. But, that momentum has slowed down in the past year because of passive consumer demand, a liquidity crisis and impacting credit growth, and corporate governance issues that have hurt the confidence of investor.
The Institutional investors have been caught unexpectedly as considered highly rated & papers they were holding yesterday, has suddenly turned rubbish. These veiled risks have jittered investors.
Hermand Daga who is the Deputy Chief Executive Officer at the Edelweiss Global Wealth & Asset Management Ltd stated that improved transparency and disclosure by corporates will be vital to win back the investors’ trust. Making credit rating agencies & auditors more accountable for their actions will go a long way towards enhancing the safety of the equity markets.
Other than the recent concerns on corporate governance & liquidity crisis, investors have been dissatisfied with the returns from the Indian markets in the last ten years, in spite of the long-term growth promise. Constantly, weak corporate earnings growth has attributed to this under-performance of the market.
According to the managing director at Kotak Institutional Equities, Sanjeev Prasad, the Indian market has delivered ordinary returns over the last 10 decade (10.5 percent compound annual growth rate). This year as well, the performance of the Indian stock markets has been a disappointment.