What are Equity Capital Markets?
Equity Capiltal Markets (ECMs) are the places (usually stock exchanges) where companies raise money by issuing equity (stocks or shares) to public and private investors. This happens in many forms:
| Initial Public Offerings (IPOs) | When a company issues shares to the public for the first time, and gets ‘listed’ on a stock exchange. |
| Secondary offerings | Also known as Follow-on Public Offerings (FPOs); these are addition shares sold by a company already listed. |
| Others | This includes block trades, private placements, rights issues, etc. |
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Why ECMs matter
- They allow companies to access capital for expansion, research, debt repayment, etc.
- They let investors buy stakes in growing businesses and share in profits.
A vibrant equity market is a sign of investor confidence, sophistication of financial markets, and dynamism in the economy.
Recent Trends in India
- In India, many companies and startups have issued IPOs in 2025, reflecting confidence in theor ability to generate capital. From January to June alone, India saw 119 IPOs, which collectively raised ~ ₹51,150 crore compared to 157 IPOs in the same period in 2024.
- In the coming months too, major IPOs (e.g. Tata Capital, LG Electronics) are expected to raise ~₹44,339 crore.
What Is Gross Capital Formation (GCF)?
Gross capital formation (GCF) refers to the total value of investment in fixed assets (like buildings, machinery, infrastructure) plus changes in inventories over a period. It’s a measure of how much the economy is investing in future productive capacity, as opposed to mere speculation.
Why GCF matters
- GCF reflects how much businesses and the public sector are putting into long-term assets that produce future goods and services.
- Higher GCF suggests that an economy is building capacity such as roads, factories, and machines, which can drive growth.
- If GCF falls, it indicates that businesses are short on cash, or reluctant to invest. This directly impacts future growth.
Recent Data: Hong Kong & India
| Hong Kong |
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| India |
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These figures suggest a rebound in investment activity in Hong Kong, and thus willingness to build physical and infrastructure assets. However, the India numbers need not discourage, as quarter (three-month period) to quarter numbers fluctuate a lot, indicating that the market is not as mature.
Why These Concepts Matter
| Equity Capital Markets | ECMs work as signals. When many companies are listing and investors are buying, it usually means optimism about growth and profitability. |
| Gross Capital Formation | GCF is a foundational measure of the economy. While companies issue shares and raise money, if that money doesn’t get invested in productive assets, growth may lag. When IPOs and GCFs aren't aligned, it implies that companies are raising money for other pruposes, such as debt repayment. |
Thus, while in India, there is a strong trend of IPOs as companies are raising cash, the dip in gross capital formation suggests that confidence in and incentives for investing in long-term assets like factories and machinery is lagging. This is an important caveat for investors, and a call-to-attention for policymakers to make it easier to advane schemes like #MakeInIndia.
