India will overtake China to become the fastest growing large economy in 2018 and the country’s equity market will become the fifth largest in the world, a report by Sanctum Wealth Management says. While developed economies are cheering 2-3% growth, India is focused on breaching 7.5 per cent. Prospective returns for equities are much higher than the 6-8% one can expect from fixed income. However, if inflation or interest rates rise, markets are not likely to register further gains. Muted earning could also impact market performance, the report says. A major change to be noted is that the domestic buyer sets market prices. Domestic mutual funds bought equities worth $15.3 billion against $8 billion by foreign investors in 2017. Reforms like Aadhaar (the 12-digit unique identification number for individual residents), Jan Dhan (scheme for universal access to banking facilities), demonetisation and goods and services tax are working to create a new inclusive infrastructure in India, according to the report.
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