“…since the 1990 I started my career in the capital market, we have seen the complete evolution of National Stock Exchange and also the reshaping of Bombay Stock Exchange… indexes are created more like a barometer of how the economy and stock market are doing,” he said in an interview to ET Now.
According to him, the real focus for long-term investors has never been predicting the exact level of market indices but understanding how economic growth compounds over time.
“We never used to estimate what the index would be but we always used to estimate how the economy can double in value over what period of time.”
He explains that India’s economic structure historically supported strong compounding. With real GDP growth of around 7–8% and inflation also at similar levels in earlier years, the nominal GDP growth often reached the mid-teens. Adding an equity risk premium meant equity markets delivered higher compounding over long periods.
“…the average compounding earlier used to be about 20%, then roughly 15%, and now it is about 12% to 14%.”
He also highlighted a simple rule often used by investors to understand compounding.
“If it grows by about 20%, it doubles in about four to four-and-a-half years.”
Over the last three decades, the most visible shift has been the dramatic rise in investor participation. India now has more than 14 crore unique investors, with a large portion joining markets in the last few years as technology, financial awareness, and access to markets improved.
Balasubramanian believes that as the markets matured, investor behaviour also evolved.
“…earlier whenever a crisis happened, investors had suspicion about how things would shape up. Today there is no question of suspicion… investor confidence and maturity levels are far higher.”
Even so, phases of sharp market corrections can create anxiety, particularly among newer investors. However, he points out that India’s markets have historically shown resilience through multiple crises.
“India has always come out as a big winner after every crisis.”
Despite the current global uncertainties and market volatility, he remains confident about India’s long-term trajectory.
“The current turmoil may create volatility, but my belief is India will emerge as one of the bigger winners in the global market.”
For investors, he says the message remains clear: stay focused on the long-term story of the Indian economy.
“Investors should continue to keep high optimism on India’s growth story compared with the rest of the global market.”
