As a rollout of the Goods and Service Tax (GST) on July 1 encourages more Indian companies to list their shares, Asia’s oldest stock exchange BSE is aiming for one thousand new listings over the next four to five years, said the Managing Director and CEO Ashishkumar Chauhan.
“BSE already has 5500 listings, and India has more than a million plus companies. So a thousand for us is not a big number,” Chauhan told CNBC in an interview. “I would be disappointed if we don’t do a thousand.”
Many of the measures that government has rolled out in recent months which includes India’s demonetization initiative and a push towards adoption of digital payments in Asia’s third-largest economy, are the additional factors apart from the impact of GST, which aims to replace a thicket of state-level taxes with a unified rate across a series of goods and services, the has formed the basis of Chauhan’s upbeat view.
Although some pain in the transitional period of about three to six months could not be avoided, but the GST will be a game changer, he said. By connecting companies to a single tax framework, the GST will transform a greater part of India’s informal economy to a formal one, according to Chauhan.
A vicious circle would be created as companies that have good business models and intentions to grow at a faster pace would also want to tap into the exchange for raising more funds for further expansion, and this attitude would be spurred by the GST and the other measures.
With both the 30-share BSE Sensex and 50-share NSE Nifty have gained over 15 percent since January, India is one of the best performing stock markets in Asia so far this year.
And BSE has been a big beneficiary of this growth. With its positive momentum largely driven by plentiful domestic liquidity, its benchmark Sensex index crossed the 31,500-mark to hit a record intraday high last week.
“India’s time in the sun has come,” said Chauhan. And especially with the lackluster gains in precious metals and real estate over the past few years, those currently are not invested in the markets could well take a second look, he added.
“The stock market has given very good returns, and with the tremendous inflows, the IPOs (initial public offers) will come in,” he said.
By value, only 20 percent of the stocks listed on the BSE are owned by foreigners, according to Chauhan.
The huge influx of retail investors coming into the markets is still the big driver for BSE’s performance.
“India actually saves a lot. On a GDP of around $2.5 trillion dollars, India saves close to 30 percent, that’s $750 billion dollars a year. On a scale of 7 percent growth for the next 10 years, India will end up saving close to $10 trillion dollars,” he estimated.
Indian investors are the ones who are largely subscribing for new equity, bond and real estate investment trusts, Chauhan said. “Foreign capital is also coming in but that’s like icing on the cake,” he said.
(Adapted from CNBC)