Tsunami of savings, doubling of equity investors to drive market, says Ramdeo Agrawal

India continuing to be the fastest growing economy in the world will keep buoying markets but it is the “huge” growth in savings and increase in equity participation that will provide fodder for market returns in the coming years, Ramdeo Agrawal, veteran investors and chairman of Motilal Oswal Financial Services, has told  Moneycontrol.

At a 9 percent growth, the economy would double in eight years, Agrawal said. He said the impact of per capita income doubling from roughly $2,500 to $5,000 would mean a huge savings build-up to support growth.

“When you progress from $1,000 to $2,000, your delta is merely $1,000. However, progressing from $2,500 to $5,000 results in a $2,500 leap, huge in absolute terms. The impact is going to be massive with large savings built up,” he said on November 21.

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Talking about the economic implications, Agarwal said over the last 25 years, India’s gross savings amounted to approximately $10 trillion thereabouts.

“Over the next 25 years, this figure is expected to surpass $100 trillion, leading to an impact of nearly 10 times greater. Numerous businesses are poised for rapid growth,” he said.

He, however, acknowledged that “the markets may not always efficiently price these companies. As the future unfolds and earnings materialise, the markets will respond jubilantly, elevating prices,” he said. “That is the optimism we hold.”

Agarwal said the “tsunami of savings is awaiting investment, with participation increasing from the retail side.” He said the equity investor base has leaped from 30-40 million a few years back to 130 million customers. “This should reach 250-300 million in the next five to six years.” Agrawal said. This surge in equity customer (investor) base will be powered by improved digital infrastructure, he said.

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