Government white paper highlights surge in stock market and FII inflows post-2014

Government white paper on Indian economy: The government of India on Thursday, February 8, presented a white paper in the Parliament concerning the country's economic performance in general and in particular, before and after Prime Minister Narendra Modi came to power in 2014. The white paper highlights the contrasting trends in the stock market and Foreign Institutional Investors (FII) inflows during both periods.

Turbulence before 2014

Scams and corruption: In 2013, the FICCI-EY survey reported scams deterring foreign investments, with 83 per cent of respondents attributing business losses to unethical conduct.
Unfavourable investor sentiment: India ranked among the least preferred equity markets in Asia as per Bank of America Merrill Lynch surveys, with concerns about inflation and policy indecisiveness.

Turnaround post-2014

• FDI surge: India emerged as a global FDI powerhouse, securing the third-highest inflows in 2022, surpassing only the US and UK.
• Robust domestic participation: Morgan Stanley reports a "dream run" of domestic flows, highlighting strong investor confidence.
• Emerging market leader: India is consistently outperforming the MSCI EM index, demonstrating resilience and growth potential.

Key drivers of change

• Improved governance: The white paper likely addresses measures taken to combat corruption and enhance transparency, boosting investor confidence.
• Macroeconomic stability: Inflation concerns have eased, and trade balance has improved, contributing to market stability.
• Structural reforms: Government initiatives aimed at improving ease of doing business, simplifying taxes, and strengthening infrastructure might be highlighted.

Looking ahead

Morgan Stanley's "standout overweight" stance: This leading brokerage affirms India's position as the most preferred emerging market, citing strong economic and earnings growth.
Upward trajectory: Recent reports from CLSA, Nomura, and Goldman Sachs echo the bullish sentiment, predicting a continued market rise.

India's stock market has undergone a remarkable journey, transitioning from FII concerns to a magnet for global investment. This transformation reflects not only improved economic fundamentals but also government efforts to create a more investor-friendly environment.