India Capital Markets Growth Story 2026 and the Role of SEBI in Building Investor Trust

ICICI Securities Ltd - INZ000183631

India's growth story has often been discussed through the lens of economic expansion, infrastructure development, and rising output. Yet, at the India Investor Conference 2026, SEBI Chairman Shri Tuhin Kanta Pandey highlighted a deeper transformation that is shaping the country's future.

According to him, India's rise is increasingly being defined by the formalization of the economy, the financialization of savings, and trust in institutions. These changes are reshaping how households save, invest, and create wealth while strengthening the role of capital markets in the country's development journey.

India Remains Resilient Amid Global Uncertainty

The global economy continues to face challenges. Ongoing geopolitical developments, including the war in West Asia, are affecting inflation, trade flows, exchange rates, and external balances. Many economies are experiencing uneven recoveries.

Against this backdrop, India continues to stand out because of its resilience. Shri Pandey noted that India remains one of the fastest-growing major economies, with growth estimated at 7.7% in FY26.

At the same time, headwinds have resulted in some moderation in growth estimates for FY27. There are also increased risks related to higher current account deficits and inflation.

India's growth is supported by domestic consumption, strong public investment, and improving participation from the private sector.

Public capital expenditure has nearly doubled as a share of total expenditure, increasing from around 12% in FY2021 to 23% in FY 2026.

Infrastructure development continues to support growth through improvements in roads, railways, ports, airports, and mobility across rural and urban areas.

The country's energy transition is also progressing rapidly. More than half of India's installed power capacity now comes from non-fossil fuel resources.

India's digital public infrastructure has emerged as a global benchmark. Investments in telecom connectivity, data centres, electronics and semiconductor supply chains, and battery storage are becoming key building blocks for a digital and artificial intelligence-driven economy.

Why Capital Markets Matter in India's Growth Story

Economic growth alone does not automatically create prosperity. Growth must create opportunities. Opportunities must attract investment. Investment must ultimately lead to wealth creation.

Shri Pandey emphasized that capital markets play a central role in this process.

Capital markets connect household savings with enterprise. They bring global capital into domestic opportunities and help convert economic momentum into investable assets.

The scale of this transformation is visible across several market indicators.

In FY 2026, equity issuance crossed ₹4.5 trillion.

Initial Public Offering activity remained strong, with 366 issuances raising approximately ₹1.9 trillion.

Corporate bond issuances exceeded ₹9 trillion.

Market capitalization has expanded significantly over the past decade, increasing from 69% of Gross Domestic Product to around 128% today, despite market corrections during the period.

Alternative Investment Fund investments have grown more than five times in recent years.

India now has around 145 million investors in the securities market, growing by more than 20% annually.

Mutual fund assets have also expanded sharply, rising from ₹12 trillion to over ₹80 trillion.

Household Savings Are Moving Towards Capital Markets

One of the most important shifts highlighted in the address was the changing behaviour of Indian households.

Household participation in capital markets has been increasing steadily. Household financial savings as a share of Gross Domestic Product rose to 21.7% in FY25 from around 20% in FY23.

A revised methodology introduced by SEBI uses granular market-level data and a wider coverage of financial instruments to present a more accurate picture of this trend.

These developments indicate that capital markets are becoming an increasingly important avenue for household savings and wealth creation.

As participation broadens, the responsibility on market design and regulation also grows.

SEBI's Approach to Regulation and Market Development

Markets of this scale require a framework that balances access, efficiency, and trust.

Shri Pandey described SEBI's approach as one of optimum regulation that protects investors, preserves market integrity, and enables growth.

The objective is to make growth investable through simpler access, predictable processes, and efficient market functioning.

Making Capital Raising More Efficient

SEBI has introduced several measures to improve the efficiency of capital raising.

Initial Public Offering timelines have been reduced.

Rights issues have become faster.

Listing norms have been rationalized to help large issuers access markets without immediate dilution pressures.

Companies undertaking reverse flipping have been given smoother access to markets. Founders are also allowed to retain Employee Stock Ownership Plans granted before Initial Public Offering filings.

Anchor investor norms have been expanded to allow participation from large Foreign Portfolio Investors operating multiple funds.

Strengthening the Corporate Bond Market

On the debt side, SEBI has strengthened the architecture of the corporate bond market.

The Electronic Book Provider platform has been expanded to include issuances by Real Estate Investment Trusts and Infrastructure Investment Trusts.

A working group is addressing operational details for introducing a market-making framework aimed at improving liquidity in the corporate bond market.

SEBI and the Reserve Bank of India are also working together to introduce derivatives based on corporate bond indices.

Measures to Improve Access for Global Investors

Several steps have been taken to facilitate participation by foreign investors.

The Swagat framework offers a single-window onboarding experience for trusted investors.

Regulatory requirements for Foreign Portfolio Investors investing in government securities have been eased.

Processes have been simplified through standardized forms, digital signature-based document submission, and tracking mechanisms.

SEBI is working with custodian banks and the Reserve Bank of India to further reduce registration and onboarding timelines for Foreign Portfolio Investors.

Operational efficiency is expected to improve through measures such as net settlement of funds, which can reduce costs and operational friction.

Policy measures, including tax exemptions on government securities and the removal of certain investment limits in corporate debt, are expected to support capital flows into debt markets.

Market structure reforms involving closing auctions and block deal frameworks have also improved price discovery and liquidity.

Growth of the Alternative Investment Ecosystem

SEBI has introduced a calibrated and facilitative framework for Alternative Investment Funds.

Regulatory flexibility has been provided for accredited investor-only schemes.

Encumbrance structures have been permitted in infrastructure investments to support long-term financing.

A fast-track mechanism has been introduced to reduce the time required for launching funds.

Compliance requirements have been eased for inoperative funds.

Flexibility has been introduced for retaining liquidation proceeds in specific situations.

SEBI has also enabled the dematerialization of Alternative Investment Fund units and investments.

Focus on Ease of Doing Business for Intermediaries

The regulator has also focused on simplifying operations for market intermediaries.

Stock broker regulations have undergone a comprehensive review to make them simpler and more aligned with evolving market practices.

Operational flexibility has been enhanced by allowing diversification into activities regulated by other financial sector regulators.

Compliance processes have been streamlined through a common reporting platform called Samuhik Prativedan Manch, reducing duplication across exchanges.

The penalty framework has been rationalized to ensure consistency and prevent multiple penalties for the same violation.

A calibrated framework has also been introduced for addressing technical glitches while reducing compliance burdens for smaller brokers.

According to Shri Pandey, the purpose behind these reforms is straightforward. The focus is on reducing friction, improving clarity, and enabling growth while maintaining safeguards.

The Importance of Trust in Capital Markets

While regulations and systems are important, Shri Pandey stressed that trust remains the foundation of successful markets.

Intermediaries, especially stockbrokers, serve as the primary point of contact for millions of investors. They help investors navigate complexity and shape their market experience.

This role brings significant responsibility.

Stockbrokers must ensure robust onboarding through proper Know Your Customer processes. They must prevent misuse and fraud, provide fair and transparent service, and act with integrity while avoiding conflicts of interest and mis-selling.

Investors experience the market through intermediaries, making trust an essential element of market growth.

Areas Under Review for Future Reforms

As markets evolve, regulatory frameworks must evolve as well.

SEBI is currently reviewing variable net worth requirements for stockbrokers so that capital requirements better reflect operational scale and risk.

The regulator is also examining improvements in price discovery through the pre-open call auction mechanism for Initial Public Offerings and relisted securities.

Efforts are underway to ease compliance requirements for research analysts, including the rationalization of call recording obligations in institutional interactions.

For mutual funds, SEBI is also proposing a more practical framework for intraday borrowing. The aim is to allow it to function as an efficient tool for managing temporary liquidity mismatches rather than only as a contingency mechanism.

Keeping the Investor at the Centre

Shri Pandey concluded with a simple principle that guides the regulatory approach.

Every reform, every system, and every transaction ultimately reaches the investor.

When investors feel informed, protected, and fairly treated, confidence grows. Greater confidence encourages participation, and stronger participation supports sustainable market development.

As India's capital markets continue to expand, maintaining this focus on investor trust and market integrity will remain central to the next phase of growth.