ANNUAL OVERVIEW AND OUTLOOK
Indias growth continues to be resilient despite some signs of moderation in growth,
says the World Bank in its latest India Development Update, the World Bank Indias
biannual flagship publication.
The Update notes that although significant challenges remain in the global environment,
India was one of the fastest growing economies in the world. The overall growth remains
robust and is estimated to be 6.9 percent for the full year with real GDP growing 7.7
percent year-on-year during the first three quarters of fiscal year 2022/23. There were
some signs of moderation in the second half of FY 22/23. Growth was underpinned by strong
investment activity bolstered by the governments capex push and buoyant private
consumption, particularly among higher income earners. Inflation remained high, averaging
around 6.7 percent in FY22/23 but the current-account deficit narrowed in Q3 on the back
of strong growth in service exports and easing global commodity prices.
The World Bank has revised its FY23/24 GDP forecast to 6.3 percent from 6.6 percent
(December 2022). Growth is expected to be constrained by slower consumption growth and
challenging external conditions. Rising borrowing costs and slower income growth will
weigh on private consumption growth, and government consumption is projected to grow at a
slower pace due to the withdrawal of pandemic-related fiscal support measures.
"The Indian economy continues to show strong resilience to external shocks,"
said Auguste Tano Kouame, World Banks Country Director in India. "Notwithstanding
external pressures, Indias service exports have continued to increase, and the
current-account deficit is narrowing."
Although headline inflation is elevated, it is projected to decline to an average of
5.2 percent in FY23/24, amid easing global commodity prices and some moderation in
domestic demand. The Reserve Bank of Indias has withdrawn accommodative measures to rein
in inflation by hiking the policy interest rate. Indias financial sector also remains
strong, buoyed by improvements in asset quality and robust private-sector credit growth.
The central government is likely to meet its fiscal deficit target of 5.9 percent of
GDP in FY23/24 and combined with consolidation in state government deficits, the general
government deficit is also projected to decline. As a result, the debt-to-GDP ratio is
projected to stabilize. On the external front, the current account deficit is projected to
narrow to 2.1 percent of GDP from an estimated 3 percent in FY22/23 on the back of robust
service exports and a narrowing merchandise trade deficit.
INDUSTRY OVERVIEW
The countrys financial services sector consists of capital markets, insurance sector
and non-banking financial companies (NBFCs). Indias gross national savings (GDS) as a
percentage of Gross Domestic Product (GDP) stood at 30.73% in 2020. The number of Ultra
High Net Worth Individuals (UHNWI) is estimated to increase from 6,884 in 2021 to 11,198
in 2025. Indias UHNWIs is likely to expand by 63% in the next five years. India is
expected to have 6.11 lakh HNWIs in 2025.
India has scored a perfect 10 in protecting shareholders rights on the back of reforms
implemented by Securities and Exchange Board of India (SEBI) in the World Banks Ease of
Doing Business 2020 report.
Indias Mutual Fund industry has experienced immense growth. In May 2021, the mutual
fund industry crossed over 10 crore folios. As of October 2022, AUM managed by the mutual
fund industry stood at Rs. 39.50 trillion (US$ 483.63 billion), and the total number of
accounts stood at 139.1 million. Inflow in Indias mutual fund schemes via systematic
investment plan (SIP) stood at Rs. 87,275 crore (US$ 10.68 billion). Equity mutual funds
registered a net inflow of Rs. 22.16 trillion (US$ 294.15 billion) by end of December
2021. About 17% assets in the mutual fund industry were generated from B30 locations in
December 2021. These assets increased by 25%, from Rs. 5.13 lakh crore (US$ 68.33 billion)
in January 2021 to Rs. 6.42 lakh crore (US$ 85.51 billion) in January 2022.
The Government of India has taken various steps to deepen reforms in the capital
market, including simplification of the IPO process, which allows qualified foreign
investors (QFIs) to access the Indian bond market. In 2019, investment in Indian equities
by foreign portfolio investors (FPIs) touched five-year high of Rs. 101,122 crore (US$
14.47 billion). Investment by FPIs in Indias capital market reached a net Rs. 12.52 lakh
crore (US$ 177.73 billion) between FY02-21 (till August 10, 2020). In FY22, US$ 14.55
billion was raised across 127 initial public offerings (IPOs). The number of companies
listed on the NSE increased from 135 in 1995 to 2,012 by FY22.
Indias market capitalization had surged by 37% from October 2021, it was at US$ 3.46
trillion. Indian stock market rally made investors Rs. 72 lakh crore (US$ 953.68 billion)
in 2021, Sensex reached an all-time high of 61,765.59 on October 18. According to Goldman
Sachs, investors have been pouring money into Indias stock market, which is likely to
reach >US$ 5 trillion, surpassing the UK, and become the fifth-largest stock market
worldwide by 2024.
OPPORTUNITIES & THREATS Opportunities
Indias financial technology, or fintech, sector is experiencing rapid evolution but it
exemplifies the nations striking contrasts. While we boast one of the highest number of
bank accounts globally, the average balance per account remains notably low. Our banking
system is immense, comprising 137 banks, 120,000 branches, with deposits totalling $1.35
trillion and outstanding credit of $900 billion, and its growing at a remarkable pace
with the sector doubling in size every five to six years. However, when it comes to per
capita metrics, we still reflect the developing nature of our economy.
A noteworthy divide is evident in the contribution to total deposits, with rural India,
which represents more than 60% of the population, contributing less than 10% of the
deposits, while urban India, comprising only around 12% of the population, contributing
50-60% of the deposits. Additionally, women own a mere 20% of the total deposits.
Despite these challenges, Indian financial institutions stand out as some of the
best-run businesses globally. They have relatively low non-performing assets (NPAs),
comprising 3-5% of total assets, high capitalization at 18% CAR (Capital Adequacy Ratio),
and impressive return ratios, with return on equity (RoE) of about 15%.
Indias financial landscape has undergone a remarkable transformation in recent
decades, boasting world-class infrastructure, well-regulated bodies, and a robust capital
market framework. Key initiatives such as Jan Dhan, Aadhar, and UPI have been
transformative, while ongoing innovations like differentiated banking/insurance licences,
Central Bank Digital Currency (CBDC), Account Aggregator, the Open Credit Enablement
Network (OCEN), Digilocker, and the Open Network for Digital Commerce (ONDC) continue to
drive progress.
With a strong foundation and Indias trajectory towards becoming a $5 trillion economy,
the financial services sector presents immense opportunities for value creation. The
fintech ecosystem is also seeing vibrant innovation.
Indias financial services and fintech industry is poised to generate more value in the
next decade than in the previous 70 years combined. We envision the financial services
market cap, currently standing at about $850 billion, to reach around $1.7 trillion by
2030. Specifically, within this market, fintech is projected to contribute an additional
$300 billion in market cap, surging from around $85 billion to nearly $400 billion during
this period. India is undeniably at a turning point, where value creation will compound
and propel significant growth.
Capital Market is a commonly used term. Capital market is a market for both debt and
equity securities in India. It is the market where business enterprises, including
companies and governments, can raise long-term funds. In other words, it can be said that
the capital market is a market where the money is provided to the borrowers for more than
a year.
The Indian capital market includes both the stock or the share market and the bonds
market. Share or stock market is the market where equities are traded, whereas, the bond
market is the market where debt securities are traded.
The Capital Market is regulated by Securities and Exchange Board of India (SEBI) and
they overlook the market in their jurisdiction ensuring that the investors are protected
against fraud apart from other duties. The regulatory bodies lay down specific rules and
regulations that must be adhered to safeguard the investors interest.
Threats
Indian economy is one of the largest and fastest-growing economies in the world. There
have been various reforms that have acted as a catalyst in the growth of the Indian
economy; however, there are specific challenges that continue to block the development of
the Indian economy.
Main challenges that act as a hurdle in the growth of the Indian economy are as
follows:
Inflation: The rate of inflation indicates the falling purchasing power of the people
of the country and the rising prices of the goods and services. Inflation happens and
continues to be one of the biggest concerns of any nation, and so is the case with India.
Though there have been many monetary policies and regulatory policies released by the
Reserve Bank of India, inflation is still one of the biggest challenges that hamper the
growth and development of the Indian Capital Market.
GDP: Gross Domestic Product or GDP is another deciding factor in the growth and
development of the capital market. GDP growth of the Indian economy is highly
disappointing and highlights a downward trend. The lower the GDP, the more challenging it
becomes for the country. Currently, India is facing a negative GDP growth due to the
pandemic spread all across the world.
Foreign Policy: A countrys foreign policy deals with Foreign Direct Investments (FDI)
that a country is likely to receive. The higher the rate of the FDI flowing to the
country, the better it is for the country in the short run as well as in the long run.
RISKS AND CONCERNS
Global Capital Markets Limited (GCML) has exposures in various line of business. GCML
are exposed to specific risks that are particular to their respective businesses and the
environments within which they operate, including market risk, competition risk, credit
risk, liquidity and interest rate risk, human resource risk, operational risk, information
security risks, regulatory risk and macro-economic risks. The level and degree of each
risk varies depending upon the nature of activity undertaken by them.
MARKET RISK
The Company has quoted investments which are exposed to fluctuations in stock prices.
GCML continuously monitors market exposure in equity and, in appropriate cases, also uses
various derivative instruments as a hedging mechanism to limit volatility.
LIQUIDITY AND INTEREST RATE RISK
The Company is exposed to liquidity risk principally, because of lending and investment
for periods which may differ from those of its funding sources. Management team actively
manages asset liability positions in accordance with the overall guidelines laid down by
various regulators. The Company may be impacted by volatility in interest rates in India
which could cause its margins to decline and profitability to shrink. The success of the
Companys business depends significantly on interest income from its operations. It is
exposed to interest rate risk, both as a result of lending at fixed interest rates and for
reset periods which may differ from those of its funding sources. Interest rates are
highly sensitive to many factors beyond the Companys control, including the monetary
policies of the RBI, deregulation of the financial sector in India, domestic and
international economic and political conditions and, inflation. As a result, interest
rates in India have historically experienced a relatively high degree of volatility.
The Company seeks to match its interest rate positions of assets and liabilities to
minimize interest rate risk. However, there can be no assurance that significant interest
rate movements will not have an adverse effect on its financial position.
HUMAN RESOURCE DEVELOPMENT
The Company recognizes that its success is deeply embedded in the success of its human
capital. During 2022-23, the Company continued to strengthen its HR processes in line with
its objective of creating an inspired workforce. The employee engagement initiatives
included placing greater emphasis on learning and development, launching leadership
development programme, introducing internal communication, providing opportunities to
staff to seek inspirational roles through internal job postings, streamlining the
Performance Management System, making the compensation structure more competitive and
streamlining the performance-link rewards and incentives.
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable
to the Company.
COMPLIANCE
The Compliance function of the Company is responsible for independently ensuring that
operating and business units comply with regulatory and internal guidelines. The
Compliance Department of the Company continues to play a pivotal role in ensuring
implementation of compliance functions in accordance with the directives issued by
regulators, the Companys Board of Directors and the Companys Compliance Policy. The
Audit Committee of the Board reviews the performance of the Compliance Department and the
status of compliance with regulatory/internal guidelines on a periodic basis.
The Company has complied with all requirements of regulatory authorities except delay
in complying with the provisions of SEBI LODR Regulations, 2015. Delay was mainly due to
the difficult phase of COVID-19 pandemic wherein the normal life was disrupted and staffs
were forced to perform their duties with limited resources. The Company has made payment
of penalty of Rs. 4.82 Lakh to BSE during FY 2020-21. No penalties/strictures were imposed
on the Company SEBI or any other statutory authority on any matter related to capital
market during the last three years.
Kolkata, August 10, 2023
Registered Office :
Sir RNM House, 5th Floor, 3B Lal Bazar Street, Kolkata - 700 001
By order of the Board For GLOBAL CAPITAL MARKETS LIMITED
S/d-
I. C. Baid
DIN:00235263 Chairman
+91-9892691696
