India’s stock market can withstand external shocks, says Nomura

Nomura Holdings Ltd. expects India’s capital markets to be resilient in the event of foreign investors suddenly getting cold feet, as local financial institutions and the retail investors flocking to invest will continue to lend their support.

“Even if there is a shock in one pillar like a downturn in the flow of foreign money, it will be complemented by the domestic institutions and retail investors,” Mangesh Ghogre, executive director and head of equity capital markets at Nomura India told Bloomberg Television’s Rishaad Salamat and Haslinda Amin in an interview on Friday.

“In the past two years, especially after the pandemic with the digital adaptation, we have seen significant jump in the retail investors, to 45% from 30%,” he said.

Indian markets have historically relied on two sources of capital: local institutions, and foreign money, Ghogre said. Some investors are worried that rising global interest rates or withdrawal of central bank stimulus could choke off the flow of overseas funds into the country’s public and private markets, posing a threat to the boom in initial public offerings from companies.

Indian companies have raised $10.8 billion from first-time share sales this year, according to data compiled by Bloomberg. At this pace, 2021 could well surpass the record $11.8 billion mopped up in 2017.

“There are questions raised, but 2022 will be a continuation of what we see in 2021.” Ghogre said. Looking at the pipeline of companies seeking IPOs, and the listing track records of those that have debuted, the party should continue, he added.

One source of confidence for the market is that loss-making companies are able to tap the market in India, whereas they once would have looked to list in developed markets such as the U.S. “That shift is well established, that they can look at India as a primary listing destination,” Ghogre said.

Apart from digital companies looking to raise money, Ghogre also expects some green energy companies to tap the market as investors seek to invest in the Environmental, Social and Governance theme.