Equity Investments: Surge and Dip of the Physical Assets

The Indian markets have crashed, is what the opposition is crying foul over the past few months. The actual problem being faced by the markets is though not in line with the assessments being done.

The free market that was unregulated and laden with malpractices involving drain on wealth had considerably dented the Indian economy since the markets began picking up pace after the Liberalisation of 1992.

Indian economy over the years had actually created a shadow economy which fostered back channel transaction involving big corporate houses and individuals storing up large stores of wealth in physical assets which could not be traced by the income tax department due to obvious reasons. The world’s second largest democracy had become the world’s largest indirect tax based economy, which created an atmosphere creating a huge income gap in the sectors of Indian economy.

While many sectors flourished, the others passed their lives in dearth. The rel estate which had seen a dramatic rise has given the fact that majority of the population lived their lives in rented accommodations or  in slums, is a real fact that there exists a rampant difference in the income parity. The above assessment has also been affirmed by the recent Thomas Picketty’s report on income parity from British Raj to 2014.

The investors found physical assets like platinum, gold, land and diamonds, to be a perfect way to hide their wealth that could not be disclosed to the taxman. This has led to a few owning and using the loopholes in the Company Laws, Taxation Laws and Banking Laws to be used to steal from the government.

The demonetisation of November, 8th of 2017, was aimed at uprooting the shadow economy. The government cannot accept publicly that there is an entire chain of wealth being stored up in physical assets in the country which has dented the economy as it will lead to a downgrade in the ratings of the Indian Inc.

The blockade caused by transparency campaign and the taxman axing transactions in the real estate and gold sector have now led to the stagnation of the economy. The crackdown on shell companies has also dented the prospects of investments in physical assets. The banking sector which is plush with liquidity but with morbid credit growth offers poor returns on interest based deposit instruments.

The new and the hottest investor destination has been the equity market. Equity markets have taken all the margin that the real estate and gold had taken all the while. There has been a dramatic rise in the equity market investments in India by about 27%, which is arming Indian corporate houses with capital required to play innovative and leadership roles globally, and generating livelihoods for the largest young work force of the country.

The overall subscription to IPOs post DeMo have been at an all time high of 17%. These figures have been verified by the NSE and the BSE trading indices. The MCX bourse has also seen its rise. The investors have started investing in raw materials which have seen a rise in the cost of the Indian raw material being exported to the world, specially China, which imports the largest raw materials from India Inc.

The future of equity markets seems to be on an all time high and thus the futur of Indian corporates defining the future course of the world may become a reality. The investors need to push in for more risk taking with equity market as the real esatae and gold have not remained as hot as they used to be.

The tightening of grip on the gold markets and the future of law on Benami properties will make India a destination for equity markets and the future will be protectionist against tax evasive economies also.

This will see a dramatic rise in the transparent and regulated securities markets in India.

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