$500 billion flywheel! Macquarie lists 3 drivers for strong growth in capital market stocks, lists top picks

While chaos around the closing auction session briefly dampened sentiment for capital market stocks, Macquarie issued a bullish note on the industry and sees a powerful multiyear growth backdrop for market infrastructure firms as capital shifts into financial assets.

Indians save $500 billion annually in financial assets and almost 50% of that is in cash and deposits, the international brokerage said in its report. It added that this cash pool is ready for market-linked products which will drive a 16% CAGR in India’s combined investment and wealth and exchanges revenue pool over FY26-30. Brokers and exchanges should benefit from a larger investor base, rising engagement and broader monetisation across investment products, it added.

Macquarie noted that although regulations may disrupt volumes, historically volume recovery is seen on the back of stronger investor protection, transparency and market stability, thereby strengthening the market. India’s capital-markets industry has scaled rapidly since FY20, supported by digital onboarding, low-cost online brokers, rising smartphone and internet penetration, UPI adoption and strong equity-market performance, the international brokerage said.


The COVID-19 pandemic further accelerated this transition by increasing awareness of market-linked investments, it noted, adding that this expansion in domestic participation has deepened liquidity and made Indian markets more resilient during periods of significant foreign institutional selling.

“Despite strong growth, India remains materially under-penetrated,” Macquarie pointed out. Only 3% of India’s population is active on NSE, around 4% own mutual funds, and average daily cash-market turnover represents 0.2% of market capitalisation, compared with 1.6% in the US and 2.8% in China.

“The next phase should be driven by the movement of household savings into formal, market-linked products. India has a 1 billion working-age people, and a growing middle and affluent class, creating a long runway for participation and product adoption. Incremental savings are increasingly balanced between physical and financial assets,” the international brokerage said.

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Three flywheels turning growth into cash

Macquarie’s bullish thesis about India’s capital market industry rests on three mutually reinforcing drivers, which are financialisation, equitisation and productisation. Financialisation expands the pool of savings entering formal products, while equitisation increases direct and indirect allocations to equities.

Productisation meanwhile raises engagement and wallet share by providing customers with more ways to invest, trade, save and manage wealth. The brokerage said this trio creates a self-reinforcing flywheel for exchanges and scaled digital brokers. “We expect the covered companies to generate multiples of the free cash flow produced over the previous four years.”

Macquarie’s capital market stock picks

Based on its multi-factor scoring and ranking, Macquarie pecking order of capital market stocks is Groww, followed by MCX, BSE, NSE and Angel One. Groww parent Billionbrains Garage Ventures is the preferred broker, supported by its customer-acquisition engine, cross-sell opportunity, margin-expansion runway and free-cash-flow potential. The analysts have an ‘Outperform’ rating on the stock and fixed a target price of Rs 260 apiece for the stock.

MCX, BSE and NSE also have ‘Outperform’ ratings, with target prices of Rs 3,820 apiece, Rs 4,000 apiece and Rs 1,965 apiece, respectively. Macquarie however has a ‘Neutral’ rating for the shares of Angel One, with a target price of Rs 285 apiece. It said the company has a recognised franchise but share losses and lower margin weaken the relative risk-reward.

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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.