India’s capital market –

investment options
A Presentation
November 30, 2006
Indian Economy and Capital Market
at a glance

 Second fastest growing economies after

China with an average annual growth rate of
more than 8 per cent in the last three years
 India’s growth rate has surpassed some of
the developed economies
 GDP at current market prices is over US
$778 billion
Indian Economy and Capital Market
at a glance
 Foreign investment can be made in India
with specific prior approval in sectors other
than those prohibited
 Foreign investment is now freely allowed in
all sectors, including the services sector
subject to specified sect oral ceilings except
in a few strategically sensitive areas
Indian Economy and Capital Market
at a glance
 General permission granted to the Indian
companies for issuing rights/bonus shares
to the existing nonresident shareholders
subject to adherence to sect oral cap
 Indian companies may issue shares under
Employee Stock Option Scheme to its
employees who are resident outside
Indian Economy and Capital Market
at a glance
 An Indian company can raise foreign currency
resources overseas through ADRs or GDRs
 Foreign Institutional Investors are allowed to invest
in India under the Foreign Institutional Investment
scheme
 Portfolio investment limits in individual companies
can be raised by Board resolution keeping the
overall sect oral cap in view
Indian Economy and Capital Market
at a glance
 Investments can be made through foreign
venture capital funds
 Private equity is allowed as an alternative
form of investment
 Qualified Institutional investors are allowed
to invest in Indian Depository Receipts
floated by foreign companies. FIIs and NRIs
can also invest in IDRs after obtaining
permission from RBI
 Indian Economy and Capital Market
at a glance

 FIIs can make investments in Corporate and

Government Bond markets within the limits

 Household Investment in Shares and

debentures as percentage of financial
savings at 4.9 per cent
 Indian Economy and capital market
at a glance
 Market capitalization of Rs.34,62,692 crore
or over US $ 770 billion as on November 17,
2006
 India is the world’s 12th largest in market
capitalization.
 Market cap-GDP ratio is almost 100 per
cent
Indian Economy and Capital Market
at a Glance

 With Sensex crossing 13,000 mark – ahead

of most of the emerging economies with a
P/E ratio of 22.01
 NSE (India’s National Stock Exchange) is
the third largest in the world in the number
of trades after NYSE and NASDAQ
Indian Economy and Capital Market
at a Glance
 India has 23 small and 2 big stock
exchanges
 The 2 big stock exchanges (National Stock
Exchange and Bombay Stock Exchange)
account for 90 per cent of trade
 Over 7000 listed companies on the stock
exchanges – largest in the world
Indian Economy and Capital Market
at a Glance
 9040 brokers in cash segment and 1064 in
derivative segment of the market
 122 investment bankers in the market
 58 under writers to support primary issues
 34 foreign venture capital funds
 120 Portfolio managers
Indian Economy and Capital Market
at a Glance
 11 custodian banks
 2 depositories with over 9 million beneficiary
owner accounts
 120 Portfolio managers
 Number of traders at 20 million
 Number of internet trading clients at 1.44
million
 Internet trading at 12 per cent of total trading
Indian Economy and Capital Market
at a Glance

 Rise in index during the last eighteen months

over 100 per cent
 Year on year return during the last year at 74
per cent
 Daily volatility of the market 0.76 per cent to
1.29 per cent
 39 mutual funds with over 500 schemes for
investment
Indian Economy and Capital Market
at a Glance
 Cumulative assets of mutual funds over
US$68 billion
 India launches Capital Protection Fund and
Gold Exchange Traded Funds
 About 1000 foreign institutional investors
Indian Economy and Capital Market
at a Glance
 Investors by foreign institutional investors at
over $50 billion
 At current prices, it is around 15 per cent of
the total market capitalization
 Only broad based entities established and
incorporated abroad are eligible to be
registered as Foreign Institutional investors
in India
Indian Economy and Capital Market
at a Glance

 FIIs can invest on behalf of their clients

through sub-accounts
 For normal FIIs, limit for investment in equity
is at least 70 per cent while the rest could be
invested in debt up to a maximum limit of 30
per cent
Indian Economy and Capital Market
at a Glance
 FIIs could also be dedicated debt funds who can
invest up to 100 per cent in debt
 FIIs can issue overseas derivative instruments like
Participatory Notes (PNs) to the entities registered
in the country of origin.
 There are 86 venture capital funds and 54 foreign
venture capital investors
 Most Foreign venture capital funds provide seed
capital to firms with enormous growth potential
 Why invest in Indian capital
markets?
 Business Week says that of 100 emerging
market firms which are rapidly globalising 21
are Indian firms
 Economists project India to become the third
largest economy in the world by 2040
 Indian capital market regulator has acquired
international credibility in the least possible
time
 Why invest in Indian capital
markets?
 India has a disclosure based regime of
regulation
 Disclosure and Investor Protection
guidelines available
 India’s accounting standards are closer to
international standards
 India has a well laid down legal framework
 Why invest in Indian capital
markets?
 India has T+2 rolling settlement as opposed
to T+3 in NYSE.
 In India the transactions are totally
electronic on a real time basis.
 India has several protective safeguards for
the retail investor such as grading system of
public offering, retail quota at 25 per cent
etc.
 Why invest in Indian capital
markets?
 SEBI has made corporate governance
guidelines mandatory for listed companies
 Mutual funds are permitted to invest
overseas up to $3 billion
 Margin trading is in vogue
 Corporatisation and demutualization of stock
exchanges on card - foreign participation in
bourses permitted.
 Why invest in Indian capital
markets?
 As an integral part of risk management
trading and exposure limits, var margins and
mark to market margins are in vogue
 Clearing houses and corporations with
novation in place
 Almost 100 per cent risk free electronic
settlement through depository system
 SEBI has a surveillance and enforcement
system in place
 Why invest in Indian capital
markets?

 India to become a regional hub for bond

trading once a free financial zone is set up
 India to set up a world class National
Institute for Securities Markets with 7
business schools under its fold