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INDIA’S CAPITAL MARKETS-GREAT INVESTMENT OPTIONS

A PRESENTATION BY :-

MUNISH SHARMA.

[CA FINAL]

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Indian Economy and Capital Market at a

glance

Second fastest growing economies after China withan average annual growth rate of more than 8 per cent in the last three years

India’s growth rate has surpassed some of thedeveloped economies

GDP at current market prices is over US $778 billion

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Indian Economy and Capital Market at a

glance

Foreign investment can be made in India with

specific prior approval in sectors other thanthose prohibited

Foreign investment is now freely allowed inall sectors, including the services sector 

subject to specified sect oral ceilings exceptin a few strategically sensitive areas

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Indian Economy and Capital Market at a

glance

General permission granted to the Indian

companies for issuing rights/bonus shares tothe existing nonresident shareholders subjectto adherence to sect oral cap

Indian companies may issue shares under 

Employee Stock Option Scheme to itsemployees who are resident outside

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Indian Economy and Capital Market at a

glance

An Indian company can raise foreign currencyresources overseas through ADRs or GDRs

Foreign Institutional Investors are allowed to invest inIndia under the Foreign Institutional Investmentscheme

Portfolio investment limits in individual companiescan be raised by Board resolution keeping theoverall sect oral cap in view

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Indian Economy and Capital Market at a

glance

Investments can be made through foreignventure capital funds

Private equity is allowed as an alternativeform of investment

Qualified Institutional investors are allowed to

invest in Indian Depository Receipts floatedby foreign companies. FIIs and NRIs canalso invest in IDRs after obtaining permissionfrom RBI

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Indian Economy and Capital Market at a

glance

FIIs can make investments in Corporate andGovernment Bond markets within the limits

Household Investment in Shares and debenturesas percentage of financial savings at 4.9 per cent

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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 marketcapitalization.

Market cap-GDP ratio is almost 100 per cent

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Indian Economy and Capital Market at a

Glance

With Sensex crossing 13,000 mark – ahead of most of the emerging economies with a P/Eratio 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

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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 stockexchanges – largest in the world

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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

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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

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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

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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

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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

capitalizationOnly broad based entities established and incorporated

abroad are eligible to be registered as Foreign Institutionalinvestors in India

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Indian Economy and Capital Market at a

Glance

FIIs can invest on behalf of their clientsthrough sub-accounts

For normal FIIs, limit for investment in equityis at least 70 per cent while the rest could be

invested in debt up to a maximum limit of 30per cent

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Indian Economy and Capital Market at a

Glance

FIIs could also be dedicated debt funds who can invest up to 100per cent in debt

FIIs can issue overseas derivative instruments like ParticipatoryNotes (PNs) to the entities registered in the country of origin.

There are 86 venture capital funds and 54 foreign venture capitalinvestors

Most Foreign venture capital funds provide seed capital to firms

with enormous growth potential

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Why invest in Indian capital markets?

Business Week says that of 100 emerging

market firms which are rapidly globalising 21are Indian firms

Economists project India to become the thirdlargest economy in the world by 2040

Indian capital market regulator has acquiredinternational credibility in the least possibletime

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Why invest in Indian capital

markets?

India has a disclosure based regime of 

regulationDisclosure and Investor Protection guidelines

available

India’s accounting standards are closer to

international standards India has a well laid down legal framework

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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.

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Why invest in Indian capital markets?

SEBI has made corporate governanceguidelines mandatory for listed companies

Mutual funds are permitted to invest overseasup to $3 billion

Margin trading is in vogue

Corporatisation and demutualization of stockexchanges on card - foreign participation inbourses permitted.

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Why invest in Indian capital markets?

As an integral part of risk management tradingand exposure limits, var margins and mark to

market margins are in vogueClearing 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

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Why invest in Indian capital markets?

India to become a regional hub for bondtrading once a free financial zone is set up

India to set up a world class National Institutefor Securities Markets with 7 business

schools under its fold

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THANK YOU .

PLEASE GIVE YOURFEEDBACK TO ME ABOUTTHE PRESENTATION.REGARDS,MUNISH SHARMA.