But the biggest disappointment of the past decade has been the continuous decline of ownership of the market by Indian investors (whether directly or indirectly through mutual funds). A recent survey showed that the total number of investors in mutual funds is less than 1.4 crores and that less than 2 per cent of Indian household savings are directed to equities and mutual funds. Cynicism is good but I believe that a large majority of Indian investors are taking this to an unreasonable degree and missing opportunities in their own backyard. Contrary to popular perception, Indian mutual funds have done an outstanding job for their investors. Look at the way Alliance Capital, HDFC, Templeton and Reliance funds have given returns to their investors in absolute and relative to the indices for the past 10 years.
In the next 10 years, it is imperative that the Indian retail investor and domestic financial institutions be actively encouraged to enter the market. With FII flows into the country at current rates, there will be not much left for the Indian public to buy if they delay too much. The only real supply that can satisfy this demand is the sale of PSU stocks by the government, but over time it would appear much healthier and balanced if Indian investors keep their faith in the market and country rather than letting foreign investors make all the first moves.
For India to be an international financial center, India needs to do much more than just improve its capital market regulations and infrastructure. Mumbai can become an international financial centre to match Singapore and Tokyo but I realistically expect that to take longer than 10 years.
Everything comes at the appointed hour. India's hour has come. It's hard to be humble about India's future.
