Indian capital market soars despite global, domestic headwinds

New Delhi: Indian capital market outperformed several major global markets, including the developed ones like the US and the UK as well as developing economies such as China and Brazil, with double-digit returns in the fiscal ended March 2019 despite numerous global and domestic headwinds, data shows.

The Indian market benckmark indices also improved on their own performance in the previous fiscal, with the BSE's Sensex (17.3 per cent) giving relatively better returns than the NSE's Nifty (14.9 per cent) in 2018-19.

This is much better than the equity market returns recorded in the US (7.6 per cent), the UK (3.2 per cent), China (minus 2.5 per cent), Brazil (11.8 per cent), Japan (minus 1.2 per cent), South Korea (minus 12.5 per cent) and Hong Kong (minus 3.5 per cent) in 2018-19.

An analysis of equity market returns for these countries shows that the Indian benchmark indices had underperformed those in the US, Brazil, Japan, South Korea and Hong Kong in 2017-18, though the performance was better than the UK and China even in that year.

With positive performance by benchmark indices and increasing fund raising from the market, the size of the capital market in India also continued to expand during 2018-19, with the market capitalisation rising by over 6 per cent to over Rs 151 lakh crore.

Besides, mutual fund asset under management grew by 11.4 per cent to nearly Rs 24 lakh crore and Foreign Portfolio Investors' asset under custody expanded by 8.6 per cent to close to Rs 30 lakh crore.

This is despite the fact that 2018-19 was relatively a difficult and challenging year on account of global and domestic headwinds. Fundraising from the capital market also continued its positive trend during 2018-19, with funds raised through debt and equity rising by 5.3 per cent to nearly Rs 9 lakh crore.

The double-digit returns came in despite subdued sentiments at times in view of certain negative developments since September 2018, particularly on the fixed-income securities front.

On the mutual fund front, debt-oriented funds witnessed net outflows on the back of certain developments in debt market since September 2018.

But, equity-oriented mutual funds continued to receive positive net inflows across all months during 2018-19 and other mutual funds received positive net inflows in 10 out of 12 months of the financial year.

Net fund inflows in equity-oriented and other types of mutual funds together were to the tune of Rs 1.58 lakh crore in 2018-19 as against Rs 2.84 lakh crore in 2017-18 and Rs 1.30 lakh crore in 2016-17.

The year also saw the much-awaited REIT (Real Estate Investment Trust) finally taking off in India. REITs have been used worldwide as a vehicle for monetisation of assets by real estate developers.

As an instrument class, it provides to investors stable and predictable returns, matching those and often exceeding returns from other alternative investments. Capital market regulator Sebi had issued REIT regulations in 2014 to give impetus to this instrument and, in turn, to the real estate sector in the country.

The government has also provided pass-through tax status to REITs registered with Sebi. In March, the first REIT public offer came, and it has listed units worth about Rs 4,750 crore.

The issue was well received with oversubscription of two times in institutional category and upwards of three times in retail category. This is the largest listed REIT in Asia in terms of area of assets.