Goldman Sachs says that investors have been flooding money into India's stock markets. It could reach $5 trillion within three years and become the fifth-largest in the world. In a Sept. 19 report, Goldman Sachs stated that Indian start-ups have raised $10B through IPOs this year. This is more than the amount raised in the previous three years. Goldman analysts stated that the pipeline for public listing is expected to be strong over the next two-years. According to Goldman's analysis, up to 150 private companies could list on the stock exchange in the next 36 months. According to Goldman analysts, new IPOs could add nearly US$400bn to the market over the next two years. This could increase India's stock market value from $3.5 trillion to $5 trillion by 2024, they explained. This will likely make South Asia the fifth-largest country in terms of market capitalization, surpassing both the U.K. or the Middle East.
Advertisement for the Paytm digital payment system in Mumbai and Zomato food delivery app in Mumbai on Saturday, July 17, 2021 by a store Bloomberg
Many of India's most prominent technology start-ups announced plans to go public. Investors believe this will signal a new era in the ecosystem. Zomato, a food delivery company, was the first to go public. Other names in the pipeline are payments giant Paytm and Ola, a ride-hailing company, and e-commerce platform Flipkart. "What we really want to flag here is that as exciting China was over the past decade, when there was this new China story that is very, very profitable for investors, we could see some kind of an analog of that happening in India," Timothy Moe from Goldman's Asia macro research, told CNBC's "Street Signs Asia." Moe was also one of the co-authors.
India's digital economy
India has more than 800 million internet users. It also has half a billion smartphone users, second only to China. Access to cheap mobile data is a key factor in India's growth. Many sectors, including grocery delivery, shopping, education, and digital payments, were also affected by the coronavirus pandemic. A number of important infrastructure improvements in the country have made it easier for start-ups and entrepreneurs to grow their businesses even before the pandemic.
We believe that Indian equity indices will be more representative of new-economy sector over the next 2 years, as large digital IPOs are included in the index. Goldman Sachs
In India, the number of unicorn-start-ups has increased by more than $1 billion in recent years. This is due to India's rapid growth and the availability of private capital as well as a favorable regulatory climate. According to the bank, there are at most 67 Indian private start-ups that could be considered a unicorn. In addition, 27 of them claimed they will reach the $1 billion valuation mark by 2021. They are mainly focused on India's digital economy.
Goldman predicted that Indian stock markets and stock indexes could be transformed by these highly valued start-ups listing in the public markets.
Shifts in the capital market
According to the investment bank, India's share of the global stock market value will rise from 2.8% to 3.7% in five years. This is higher than Goldman's forecast of 40 basis points growth in India's global GDP over five years. Indian indexes such as the Nifty may see a greater representation of so-called new economic sectors, due to large floats from Internet start-ups being included in the index. The indexes currently have a dominant presence in financial stocks and companies from traditional sectors such as energy and information technology. The term "new economy" refers to high growth industries that are supported by the most recent technologies. They are considered to be the driving force behind economic growth.
