Policies to sustain India's market

Why is so much investment flowing into India’s securities markets? Probably because of (a) India’s market size and (b) growth, despite all its inconsistencies and difficulties. Are higher price-earnings multiples desirable? Yes if they are sustained, because more capital is available for equivalent productivity; otherwise, no. The question is whether policies can be better framed to harness the market potential.

India’s large market with its headroom for prosperity seems propelled partly by its own momentum, and its stocks partly by liquidity. The net investment in mutual funds in 2016-17 of Rs 3.43 lakh crore was reportedly double the previous year, the