India's capital market needs to grow, Uday Kotak, managing director, Kotak Mahindra, told a session on India's financial markets at the Asia Society Conference in Mumbai.
India has "capital markets in its blood," he said.
The session, which was very well attended, aroused interest since the Indian financial markets are booming and attracting international attention.
Moderator Jack Wadsworth, advisor director, Morgan Stanley and vice-chairman, Asia Society, spoke about the Indian capital market, which is the mainstay of its free market economy. He stressed, however, that the market needs to get bigger to accommodate the increased number of players.
A K Purwar, Chairman, State Bank of India, agreed that the size of the market must increase, adding that he was optimistic, since the private players are growing fast. Purwar also spoke about the increasing autonomy being given to public sector banks, although he was not very sure if the 51 per cent stake held by the government would be reduced any time soon.
Kotak reminded the audience that then finance minister Yashwant Sinha had made a budgetary recommendation for the government control to be reduced to 33 percent. "We have to admit that we work in an environment linked to political realities, which are fluctuating," he said.
Kotak said he has reason to believe that when the time comes to choose between growth and control, it would choose growth.
"There is also a growing awareness about the premium put, especially by foreign investors, on the quality and nature of governance," he said.
He emphasised the urgent need to make the Indian capital market deeper and more liquid. One way, he suggested, is to prevent fragmentation of stock markets and consolidate them.
Brooks Entwistle, managing director and executive vice-chairman, Goldman Sachs India, spoke from the perspective of a foreign firm operating in India. "A significant change we have noticed is that when we present lists of assets to buyers in the United States, Europe or elsewhere in Asia, Indian assets must be on it," he said.
"There is such tremendous interest in India at the moment." He also spoke about the emerging sectors like healthcare, pharma and biotech, which he saw as being 'exciting additions' to the Indian capital market.
Kotak said the pressing issue is for India to operate the convertible bond market, which is currently completely offshore, on a domestic scale. He also stressed on the importance of applying 'know your customer' norms, which are lacking in India.
Entwistle added that more investment opportunities need to be created, since the volume of international capital flow would definitely increase. "There is going to be a second big wave of private equity coming into India," he said.
What Kotak remained optimistic about was the competitiveness and tenacity of Indian firms. "It's easy to forget that ten years ago, Infosys was considered a small player or that Bharti did not exist," he said. "All the big Indian players started small and their examples are great ones."
