15% CAGR: Why Ramdeo Agrawal Believes Your Portfolio Could Double In Next 5 Yrs; Is Bull Run Ahead?

Indian stock market to grow at approximately 15 per cent over the next five years,  Motilal Oswal Financial Services Chairman Raamdeo Agrawal predicted on the back of resilient economic growth and rising corporate profits.  Agrawal believes that the Indian economy will grow at approximately 7.5–8.5 per cent and corporate profits growth will be at 13–14 per cent, leading to index returns of approximately 12–14 Per cent.

“An annual return of nearly 15 per cent over the next five years seems most likely. This would double your portfolio," Agarwal said in an interview with The Economic Times. However, he flagged FII exodus concerns and advised having a competitive capital gains tax to attract them for the long term.  

Why are FIIs staying away?

Aggarwal attributed the lack of enthusiasm among foreign institutional investors (FIIs) about India to the boom in other markets, particularly the US and Asian markets like Korea and Taiwan. He said foreign investors are attracted to markets with better earnings and growth, adding that the US remains a very strong competitor for global capital.

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According to Agarwal, among other emerging markets poised to benefit from the artificial intelligence boom, India has emerged as an important destination for capital allocation. However, he sees selling pressure from foreign investors improving.

Agarwal told ET, “The good thing is that FIIs in India have adopted a 'stop selling' approach. This solves 90% of my problems.” He further added that he sees limited downside potential from current levels.

Investment from foreign portfolio investors has been a key driver for Indian stock markets. This is because global investors have reallocated their funds across markets amid changing interest rate expectations, currency fluctuations, and the AI-driven boom in technology stocks.

Capital gains tax a 'hassle', causing more damage to the rupee

Agarwal said that India's capital gains tax system is a barrier for foreign investors. However, according to him, the biggest concern for foreign investors is Indian currency's devaluation.

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He explained that foreign investors invest in India in dollars, but pay capital gains tax based on rupee calculations. As a result, an investor may have to pay capital gains tax in India, even if they actually receive little or no return upon converting their investment back to dollars.

Aggarwal believes India needs to keep its capital gain taxes competitive to maintain long-term relationships with foreign investors. Currently, in India, short-term equity capital gains are taxed at 20 per cent and long-term gains at 12.5 per cent.