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Can India Inc Be A Global Investor?

India is at the brink of a giant leap and to accelerate that growth, allowing listing of foreign companies on Indian bourses and letting them compete with our Indian counterparts will increase the relative price of our currency to other currencies, as well as our diplomatic and economic strength globally.

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As per Organisation for Economic Co-operation and Development (OECD) data of October 2019, there are approximately 41,000 listed companies in the world with a market value of more than US$ 80 trillion. New York Stock Exchange (NYSE), nicknamed the Big Board, with a cumulative market cap fluctuating around US$ 30 trillion mark is the largest exchange in the world. It has over 2,400 companies trading out of which 1,739 are local American companies and rest are foreign listings from all parts of the world. Being the numero uno exchange, every global company wants to be and they do allow foreign companies to list and everyone is allowed to tap into American capital market. 

India is at the brink of a giant leap and to accelerate that growth, allowing listing of foreign companies on Indian bourses and letting them compete with our Indian counterparts will increase the relative price of our currency to other currencies, as well as our diplomatic and economic strength globally. We will be sought after instead of being the seeker. If there was one international exchange in the country, where foreign listing is allowed, the amount of foreign exchange inflow that we can attract is unprecedented. Foreign Indirect Investment (FII) will flow in and along with that comes a focus on India as a place where outsiders are as welcome as they welcome us. Foreign Direct Investment (FDI) will follow too. FII will also go sideways into our companies. Our corporate culture will evolve quicker. Sustainability will take precedence over cut throat capitalism which is a road towards disaster.

BSE being the biggest exchange is well poised to be India’s trojan horse into the financial markets globally. Behavioral aspects included, there are huge upsides to this prospect as people of India cannot invest more than US$ 250,000 overseas today and they could potentially have the opportunity to invest in top global stocks at home, which I am sure India will attract. The big question is, should opportune money go to foreign companies instead of local ones? The answer is the intellectual meat of global businesses and the lingering pessimism to do with stock markets could use a wave of globalization, that will only make Indian standards meet the global ones. Only then can we become atmanirbhar. Ancillary professions like legal, broking, banking, intermediaries, investment banking and the rest will see a surge in demand. We will also see more and more companies setting up shops in India, opening offices as well as spending the rupee raised, in India, potentially. There will be global data circulating in Indian media as these companies will come with a plan. Why are we not ready to make place for them? Institutional investors, funds, foreign banks will then have to deal with India, and Indian Rupee(INR) will definitely be more sought after. In the day and age of information, this move is one that will bring suitors with presentations and world leaders happy to work with a country that lives up to it’s side of the bargain. India and it’s financial capital need stealth and this is pure armour.

Today’s Indian investor has far less choice than their counterparts in other economies, in terms of diversity in geography. Each company comes with its own culture and India Inc is ready today. While India has very good companies, the country is behind the curve in many industries, who will then take special interest in our country and set up floor shops. The over-all recipe seems like a move Indian government should seriously think about. Being an investor country, India can be at a better bargaining position internationally. Till when is our country going to be on the receiving side only? Companies could be allowed to list within certain ceilings and caps to avoid large rupee outflows in a particular year. That may be needed to avoid currency fluctuations.

Economics of control are necessary but optimism and potential drive currency value. too There is nothing wrong in opening Indian capital market to the world. India could attract listings from neighboring countries, and countries from across the world. We could be brimming with global activities and daily foreign exchange trading happening. There is a large aspect of behavioral economics that will come into play with this potential move as well. 

In 2020, in market cap, NYSE is currently followed by NASDAQ, Japan Exchange Group, Shanghai Stock Exchange, and Hong Kong Stock Exchange; these are the top five stock exchanges by market size. The next five are Euronext of the European Union which is based in Amsterdam, Shenzhen Stock Exchange, London Stock Exchange (LSE), Toronto Stock Exchange (TMX), then Bombay Stock Exchange (BSE). There are ancillary exchanges for new ventures and these exchanges have smaller companies, such as Alternative Investment Market (AIM) in London. All major economies have opened their exchanges to the world, and in lieu, they get business from all parts of the world. This is an era that demands us to open windows of liberalization.   

BSE is hovering around a net market capitalization of around US$2.22 trillion and the other major exchange, Indian National Stock Exchange (NSE) is at approximately US$.2.09 trillion. There are more than 5,000 companies listed on BSE and more 1,600 companies listed on NSE.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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investment global investment india economy

Vaibhav Maloo

The author is Managing Director of Enso Group. He resides in Mumbai. He holds an undergraduate degree in business from Carnegie Mellon University and a postgraduate diploma in global business from Oxford University.

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