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National Stock Exchange CEO Ashish Chauhan and IIFL Chairman Nirmal Jain highlight the pivotal role of governance, market access, and demographic trends in shaping India’s financial future at Harvard India Conference
By AB Wire
Robust governance, strategic global integration, and a young and growing population are set to shape the long-term financial trajectory of India’s stock market, according to industry leaders. At the opening of the 22nd Harvard India Conference on February 15, a panel titled “India’s Capital Markets: Catalysing Collective Prosperity” featured National Stock Exchange Managing Director and CEO Ashish Chauhan and IIFL Group Chairman Nirmal Jain, who underscored these factors as central to the country’s evolving financial landscape.
Chauhan, at the outset, challenged the conventional view that stock markets are solely about trading. “Many times people think the purpose of the stock market is trading,” he said, pointing out that “the purpose of stock market is to raise funds.”
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He detailed how, in the past year alone, India raised around $19.6 billion through IPOs—and when rights issues, bonds, and commercial papers are factored in, the total funding surges to roughly $220 billion. “We are not only funding India’s corporate sector in equities but also in credit,” he explained, adding that almost 40% of corporate credit now originates from the market.
Chauhan, who served as the head of Bombay Stock Exchange for 10 years, further highlighted the unique structure of Indian capital markets, where a vast pool of over 110 million retail investors stands ready to back entrepreneurial ventures.
“Literally, in case you don’t get funded by angel investors, venture capitalists or private equity guys, I have now 110 million… investors who are willing to fund your dream,” Chauhan said, emphasizing the democratizing power of these markets.
Adding to this narrative, Jain recalled his company’s journey over the past three decades.
“When we started in 1995, it was the beginning of the internet boom,” he recalled. Transitioning from a traditional offline entity to launching an internet-based trading platform in 2001 — then known as “5paisa” — Jain explained how their bold move to offer brokerage at five basis points, compared to the traditional 100-200 basis points, paved the way for a more inclusive market.
Jain described the evolution from retail broking to a full-fledged financial services ecosystem that now boasts 4,500 branches, 40,000 employees, and millions of retail accounts.
“What India has done, which actually can show the way to the rest of the world, is [to] build an amazing digital infrastructure,” he said, noting that demand accounts have multiplied fivefold in the last five years. He attributed this success to India’s cutting-edge digital infrastructure, which offers a biometric identity and near-negligible transaction costs—factors that have made investing accessible to nearly every household.
The conversation then turned to the issue of valuations amid rapid market growth. With local currency returns exceeding 100% over five years and stocks trading at high price-to-earnings multiples — Zomato, for example, at about 300 times earnings — some investors have expressed concern about overvaluation. Chauhan responded by placing India’s higher multiples in context: “Valuation in India has always been higher because … it’s a function of growth,” he said. He pointed out that while India’s market currently trades at roughly 18.5 times one-year forward earnings — a level consistent with historical norms — the country’s long-term performance tells a different story.
Citing a comparative study, Chauhan highlighted that over multiple time frames, a significantly larger number of India’s top 500 companies have delivered compounded dollar returns of at least 15% compared to their counterparts in the US and China. “I may be a little biased, but I think you’ll see volatility in a market like India, which is emerging, but long term investors will always find more money to be made, regardless of perception about value being higher than that, when they compare with, say, US or other markets.”
Amid stories of private market valuations and the occasional corporate misstep, both panelists stressed the importance of robust corporate governance. Corporate governance is about giving information to the public immediately and on a level playing field, Chauhan explained. He contrasted the Indian system — where every share confers equal voting rights — with practices in some developed markets that offer preferential shares or golden shares. “Today, one of the reasons, in my opinion, why India gets a better price advance or a premium to the rest of the world is because India has better corporate governance,” he added.
Jain concurred, acknowledging that while no free market is perfect, India’s governance standards, especially for listed companies, are among the best. He remarked, “[In a] free capitalist market, Byju’s kind of incidences are bound to happen, but they are fewer far better for the size of the economy that we are.” He pointed out that Byju’s was not a listed company, and from “the corporate governance perspective,” “listed company is what counts.”
The discussion also tackled the growing globalization of Indian markets. Jain pointed out that India is becoming increasingly integrated with the world’s financial systems — recently joining global bond indices and emerging as a key player in the Morgan Stanley Emerging Markets Index. He praised policymakers for their cautious yet forward-thinking reforms, such as establishing the International Financial Services Centre (IFSC), which have helped calibrate this integration.
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Chauhan painted a vivid picture of India’s unique advantage: “There are economics books written saying low per capita income countries cannot have a well-functioning capital markets. Because poor people cannot save, and if they save, they don’t trust even their brothers. How will they trust somebody else sitting somewhere else,” he said.
“When [NSE] started in ’94, India had probably close to 10 million investors. And total market capitalization of $50 billion. Today, after 30 years, it has a total market capitalization of around $5 trillion,” he said, crediting this success to a potent mix of technology and trust — not only in regulators and institutions but, importantly, in India’s entrepreneurs.
“How did this come around? So many people started participating, so many poor people started trusting other poor people to do businesses and give them money back,” he said.
Chauhan also highlighted India’s youthful demographic as the ultimate driver of future wealth creation. “The new waves of technology are going to come faster. The new waves of trends are going to happen faster. And who will create that wealth? Young population with technology orientation, right? Where is that? In India.”
Jain added that while China grapples with an aging population due to its long-standing one-child policy, India’s demographic dividend positions it at the forefront of global economic conversations.
Both panelists concluded on an optimistic note, envisioning a future where India not only adapts to but also leads global trends in technology and finance.
“My hypothesis is that next 50 years, the world will create more wealth than what was created in the last 10,000 years,” Chauhan predicted. If India, with 20% of the world’s young population, can capture even 25% to 30% of that wealth, the country will be truly transformed, he added.
The panel was moderated by Akash Deep, Senior Lecturer in Public Policy at Harvard Kennedy School. The 22nd edition of the annual India Conference at Harvard, held at the Kennedy School and Harvard Business School, attracted close to a thousand delegates and dozens of prominent speakers from India and the United States.
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