Public markets in India have seen recovery in global flows while private ones have experienced a slowdown in international money.
India’s financial markets are charting contrasting trajectories. While public markets surge on the back of robust domestic inflows, private markets grapple with valuation corrections driven by declining global investments.
India's public markets have witnessed a remarkable rebound in foreign investments, signalling renewed confidence in the country’s economic prospects.
December 2024 marked a strong recovery for foreign portfolio investors (FPI), with net inflows surging to Rs240.5bn ($2.87bn).
This divergence underscores the complex interplay of structural, macroeconomic and institutional factors shaping the country’s investment landscape, highlighting both resilience and challenges in Asia’s fastest-growing major economy.
A pivotal factor is India’s youthful demographic. With a median age of 28.4 years, the country benefits from a substantial working-age population poised to drive economic growth through increased workforce participation, higher productivity and consumer demand.
“The public markets have been doing really well; that's largely on the back of the domestic flows,” said Arpita Vinay, managing director and co-chief executive at Spark Private Wealth Management, an Indian firm with $3.3bn in assets under management (AuM). The international flows had originally been negative. “The corollary is not true for private markets because a large part of it was coming in from global flows,” she added. That’s changing now.
India’s private markets face a challenging environment due to reduced global liquidity and shifting investor sentiment. Speaking at the Global Wealth Management Summit 2024, Ms Vinay explained that private markets in India initially developed through investments from high net worth individuals and family offices, channelled via alternative investment funds (AIFs) introduced 10 years ago. In contrast, private markets in the US and other global markets were first supported by endowments, insurance companies and institutional investors.
“I do not think this is a cyclical slowdown,” said Ms Vinay. “It's moderation of global flows.”
In the first half of 2024, private credit numbers doubled year-on-year, even as offshore investments dropped 10 per cent, she claimed. Despite ‘unicorn’ creation slowing due to reduced global spending, strong initial public offering exits highlight resilience and opportunities.
‘Make in India’ — 10 years on
Launched in September 2014 by prime minister Narendra Modi, the "Make in India" initiative sought to position the country as global hub for design and manufacturing. The programme aimed to attract investment by encouraging companies to develop, produce and assemble products domestically, driving a transformative shift in India's manufacturing sector.
“I think the building blocks have been set up,” said Vikram Malhotra, co-founder and chief executive of 360 ONE Global, one of India’s largest asset and wealth management firms with an AuM of $68bn. “India is the world's second-largest manufacturer of mobile phones, so 10 years ago, we exported about $200m worth of mobile phones; it is $15bn now.”
The initiative is seen as laying "tremendous building blocks" for the future, with potential to meet ambitious targets in manufacturing and economic growth by 2030. Digital initiatives such as the Digital India programme aim to strengthen digital infrastructure and streamline services. These include online platforms for business registration, tax filing and regulatory compliance, which claim to simply business operations in the digital era.
In 2024, India held elections which Mr Modi won with a narrower majority than expected. Still, Ms Vinay believes this will not affect the trajectory of business-friendly policy making.
“It is still a government in majority, and to ensure continuity in policy, almost all key ministries continue with people that were in charge earlier on,” she said. “In a democracy, it's good to take a knock, but from a policy standpoint, there’s absolutely no change at all.”
India is also making significant strides in the energy transition, particularly in solar energy. The country has set a target to be carbon neutral by 2070, with a major focus on renewable energy. "Last year, India needed a capacity of about 35 gigawatts; what they have created is a capacity of 100 gigawatts,” said Ms Vinay.
When asked about India’s relationship with US president-elect Donald Trump, Mr Malhotra said: “Very, very positive for India. He's been to India in the past… there's a lot of fanfare and a sort of public affection between Modi and Trump.”
