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2011SPECIALREPORT
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EMERGINGMARKETSOPPORTUNITIESlINDIA2
INSIDETHEREPORT
3
PrologueIndiasEconomicIndicators
456789111316171920
IndiaasapreferreddestinationforInvestments?IndiasRatingIndiassignificanceovertherestofworldmarketsEconomicgrowthandprojectionsbyIMFSectoralContributiontoIndiasGrowthTrendsinIndustrialOutputForeignInvestments&PerformanceScenariosBestInvestmentOptionsfor2011PerformanceofForeignFundsinIndiaFundsStatusinIndiaInvestmentnewsConcludingRemarks
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PROLOGUE
Theworldslargestdemocracyandsecondmostpopulousnation,Indiahasseenasignificantgrowthinitseconomicinvestmentandoutputsincethe1990s.Ascomparedtofigure,Indiaseconomyhasshownanaveragegrowthrateofmorethan7%inthedecadesince1997,therebydecreasingpovertybyabout10percentagepoints.Thecountrysdiverseeconomyseesagricultureastheprimarydependence,thoughservicesnowaccountsformorethanhalfofIndiasoutputandonethirdofitsentirelaborforce.IndiahadshownviableimprovementinITsector,becomingamajorexporterofsoftwareservicesandsoftware/ITworkers.Indiaemergedrelativelyuntouchedfromthefinancialcrisisof2007-08asitreportedastrongGDPgrowthof7.4%inthe2009-10fiscalyear,evenwithapoorrainyseasonduringthisperiod.FirsthalfGDPgrowththisyearhasbeenreportedat8.9percentoverthesameperiodinthepreviousyear.IndiahasalsoattractedlargeamountsofforeigninvestmentintheformofFDIaswellasportfolioinvestmentsthisyear,duetoitsquickrecoveryfromfinancialcrisis.TherecoverycrisisstillprevailsinnationslikeEuropeandtheUnitedStates,thoughIndiaalongwithmanyotheremergingmarketshasseenanincreasedinfluxofforeigncapital.CapitalrequirementsforIndianindustryremainhighgiventherapidexpansionoftheeconomy,whichmeansFDIinvestmentsareeasilyabsorbed.PortfolioinvestmentinIndiathisyearhasbrokenallpreviousrecordsresultinginasteepriseintheequitymarkets.Thishasincreasedthechancesofbubbleformation.Between
April1,2009,andNovember8,2010,theBSESensexshowedsharphikefrom9,901pointstoanall-timeclosinghighof21,004points.Thatindexhasbeenhoveringaroundthe20,000markeversince.ThetablebelowrepresentsthetrendofIndiasmajoreconomicindicatorsoveryears
India:SelectedEconomicIndicators
Country
2007/082008/092009/10(Est)
2010/112011/122012/13(Proj)(Proj)(Proj)
RealGDP(atfactorcost,%change)WholesalePriceIndex(average%change)Exports(%changeincurrentUS)Imports(%changeincurrentUS)CurrentAccountBalance(%ofGDP)
9.24.526.432.1-1.45.074.5
6.78.37.911.5-2.58.875.1
7.43.4-12.5-7.8-2.49.577.1
8.58.020.418.3-2.48.574.1
9.06.017.415.3-2.37.471.3
8.55.017.014.4-2.16.669.2
Sources:CentralStatisticalOrganization,ReserveBankofIndiaandWorldBankStaffEstimates.
GeneralGovernmentDeficit(%ofGDP)GeneralGovernmentDebt(%ofGDP)
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INDIAASAPREFERREDDESTINATIONFORINVESTMENTSIndiaisexpectedtoachieve9percenteconomicgrowthinthecurrentfinancialyear,drivenbystrongperformancebytheagricultureandindustriasectors.Theeconomygrewby8.9percentinthesecondquarteroftheFY2010.Indiahasemergedasoneoftheworldstoptencountriesinindustrialproduction.Thenationsindustrialproductiongrewatthefastest,Indiaistheworldslargestrecipientofoverseasremittances.Theremittancesgrewfrom$49.6billionin2009to$55billionin2010.ItisalsothecountrywiththesecondlargestnumberofemigrantsafterMexico,accordingtotheWorldBank.Indiaisoneofthefastestgrowingautomobilemarketsintheworld,expandingat35percentonaverageinthefirstfourmonthsoftheFY2010.TheBombayStockExchangehasbeenratedastheworldsbestperformingstockmarketrecently.Witha13percentgain,Sensexisamongtheworlds10biggestmarkets,accordingtodatacollectedbyBloomberg.TheIndianeconomyistheeleventhlargestintheworldbynominalGDPandthefourthlargestbypurchasingpowerparity(PPP).Indiaisamongthetop10nationsintermsofforeignexchangereserves.Thecountrysforeignexchangereservesbreachedthe$300-billionmarkforthefirsttimesince2008withanadditionof$2.2billiononthebackofahealthyriseinforeigncurrency.Thenationsforexreservescurrentlystandat$296.40billion.Indiasservicessector,backedbytheITrevolution,remainsthebiggestcontributortothecountrysGDP,withacontributionof58.4percent.Theindustrysectorcontributed24.1percentandtheagriculturesectorcontributed17.5percenttotheGDP.TheIndianIT-BPOindus
tryisexpectedtoexceed$70billioninfiscal2011.TheIndianIT-BPOexportsareprojectedtogrowby13percentto15percentwhiledomesticIT-BPOwillgrowslightlymoreby15percentto17percentduringfiscal2010-11.Indiaownsover18,000tonnesofabovegroundgoldstocksworthapproximately$800billionandrepresentingatleast11percentofglobalstock,accordingtoestimatesofWorldGoldCouncil.Indiaranks11thintheworldwith557.7tonnesofgoldreserves.Indiascivilaviationsectorwillbeamongthetopfiveintheworldinthenextfiveyears.Indiandomesticairtrafficisexpectedtoreach160-180millionpassengersperyear,whileinternationaltrafficwillexceed80million.India,ChinaandBrazilarethetopthreetargetcountriesforforeigndirectinvestmentuntiltheendof2012withtheUnitedStates,foryearsnumberone,nowinfourthplace,accordingtotheUNtradeanddevelopmentagencyUNCTAD.TheIndiantelecommunicationsindustryistheworldsfastestgrowingtelecommunications
industry,723.28milliontelephone(landlinesandmobile)subscribersand687.71millionmobilephoneconnectionsasofSeptember30,2010.
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INDIASRATINGStandard&PoorsraisedIndiasoutlooktostablefromnegativeonexpectationsthattheeconomysfiscalpositionmayrecoverandtheeconomywouldremainonastronggrowthpath.Theagencyalsoaffirmeditsratingonthelong-termandshort-termcredit.FollowingarekeyeconomicissuesforAsiasthird-largesteconomy.IndiaswholesalepriceindextoppedexpectationandcamewithintouchingdistanceofdoubledigitsinFebruary.Annualwholesalepriceinflationacceleratedto9.89percentinFebruary,thehighestsinceOctober2008andwellabovetheReserveBankofIndias(RBI)endMarchprojectionof8.5percentandthe8.56percentJanuaryreading.FitchsOutlookonLong-termratingsforIndianbanksremainsStablein2011,afteranegativebiasin2009followingthecreditcrisis.TheStableOutlookreflectseasingassetqualityconcerns,togetherwithanimprovingloanlossreservespositionandexpectationsoffurtherinfusionsofcommonequitybythegovernment.MoodysInvestorServicehadupgradedIndiaslocalbondratingtoBa1,onenotchbelowinvestmentgrade,citingimprovingpublicfinancesduetorecentgovernmentreforms.MoodysalsosaiditwouldconsiderunifyingIndiaslocalandforeigncurrencyratingsatBaa3.FitchRatingsraisedIndiaslocalcurrencyratingoutlooktostablefromnegativeforecastinglowerdebtratiosonthebackofstrongeconomicgrowthandrobustcashflowsfromtelecomauctions.TheagencyaffirmedIndiasBBB-minuslocalandforeigncurrencyratingandthestableoutlookonitsforeigncurrencyrating.
COMPARITIVESURVEYNCEARDunandBradstreetandRBI(Percent)
175
6560
125
5550
75
4540
25
78906789678907890-0-0-0-0-0-0-0-0-0-0-0-0-0-0-1-1-1epDecMarJunSepDecMarJunSepDecMarJunSepDecMarJunSepS
35
NCAERHSBC-Markit
Dun&BradstreetFICCI
RBI-BEI(ExpectationQuarter)
HSBC-MarketandFICCI(Percent)
BusinessConditionsSurvey:AComparison
225
7570
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ReserveBanksIndustrialOutlookSurvey:BusinessExpecationIndex
1301251201151101051009590850505050606060607070707080808080909090910101010202002020202020202020202020202020202020202020nepec2arunepecarunepecarunepecarunepecarunepecssssJusMJMJMJMJMJsr-ul-t-Dn-r-ul-t-Dn-r-ul-t-Dn-pr-Jul-ct-Dan-pr-Jul-ct-Dan-pr-Jul-ct-DAOOJOJAApJOcJaApJOcJaApJOcJaA
80
Assessment
Expectations
Threshold
INDIASSIGNIFICANCEOVERTHERESTOFWORLDMARKETS
IndiatoovertakeUSas2ndlargesteconomyby2050:PwCAsperthereportpublishedbyPwC,IndiaisexpectedtoovertaketheUSAandem
ergeastheWorldssecondlargesteconomyonpurchasingpowerparitybasisby2050.ItalsostatedthatIndiahasthepotentialtosurpassChinaasthecountryhasasignificantlyyoungerandfastergrowingworkingagepopulationthanChina.Globalfinancialcrisishasfurtheracceleratedtheshiftineconomicpowertotheemergingeconomies.
IndiaamongtheworldstopthreepreferredinvestmenthubsAColumbiaUniversityreportstatedthatIndiaisamongsttheworldstopthreepreferredinvestmentdestinations,butequitycapslimitthesizeofpotentialinflows.ThereportstatedthatasthemaindriversofforeigninvestmentinIndiawereliberalizationinforeigndirectinvestment(FDI)policyandseveraleconomicsectors,agloballycompetitiveworkforce,andrapidgrossdomesticproduct(GDP)andmarketgrowth.ItalsostatedthatIndiaispresentlythe13thlargest
intermsofforeigninvestmentinflows,whichhaverisen15-foldsince2000.Thereportsaidwhileinvestorsinitiallyconcentratedonmanufacturing,powerandtelecommunications,theynowfocusonservices.
Indiasgrowthdrivesglobaleconomicrecovery:WorldBankWorldBankPresidentRobertZoellickhasrecentlystatedthatthehighlevelofgrowthinIndiaishelpingtheinternationaleconomyrecoverfromthedisastrouseffectsofrecentfinancialturmoil.Hesaidthatwhentheworldeconomiesweretryingtorecover
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fromfinancialturmoil,Indiasgrowthratepickedupto7.4percentin2009-10from6.7percentayearago.Theeconomyexpandedby8.9percentinthefirsthalfofthecurrentfiscal,makingIndiaoneofthefastestgrowingeconomiesintheworld.AspertheInternationalMonetaryFunds(IMF)forecasts,Indianeconomyisexpectedtorecordagrowthrateof8.8percentin2010-11.
DomesticmarketopportunitiesaregrowingfastinIndiaAspertheIndiaEconomicUpdatebyWorldBank,thecountrysmiddleclassisestimatedtoexpandfrom50millionpeoplein2005to500millionby2025.Theoutlookforthenext20years,however,makesIndiaanattractivemarkettoinvestin,andmanyinternationalconsumergoodscompaniesdoso.Fornowmanyofthemcontendthemselveswithsalesoutletsratherthanproductionbases,becauseeconomiesofscaleallowthemtodoproducecheaperelsewhere.Thisischanging,however,inparticularwhenproductioncostsinEastAsiaarerisingwithrisingwages.
ECONOMICGROWTHPROJECTIONSBYIMFCountry20072008200920102011
WorldOutput(atMarketExchangeRates)AdvancedEconomiesEmerging&DevelpingEconomiesU.S.A.EurozoneGermanyFranceItalySpainNetherlandsJapanU.K.CanadaAustrailiaKorea,SouthTaiwanSingaporeNote:Asean5areIndonesia,Thaila
nd,Philippines,MalaysiaandVietnamSource:UpdatetoWorldEconomicOutlook,IMF,July2010andWEOApril2010DatabaseChinaIndiaAsean5BrazilRussiaSouthAfrica
3.92.88.32.12.82.52.31.53.63.62.42.62.54.75.16.08.213.09.46.26.18.15.5
1.80.56.10.40.61.20.3-1.30.92.0-1.20.50.42.45.16.08.29.67.34.75.15.63.7
-2.0-3.22.4-2.4-4.1-5.0-2.2-5.0-3.6-4.0-5.2-4.9-2.61.30.2-1.9-2.08.75.71.7-0.2-6.6-1.8
3.62.66.83.31.01.41.40.9-0.41.32.41.23.63.05.77.79.910.59.46.47.14.32.6
3.42.46.42.91.31.61.61.10.61.31.82.12.83.55.04.34.99.68.45.54.24.13.6
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SECTORALCONTRIBUTIONTOINDIASGROWTHThesectorscontributingtotheIndiasGDPisbiginnumbersandincludesfoodprocessing,transportationequipment,petroleum,textiles,software,agriculture,mining,machinery,chemicals,steel,cementandmanyothers.AgricultureisthemajoroccupationinIndia,employingmorethan50percentofthepopulationwhileservicesectoremploysmorethan25percentandtheindustrialsectoraccountsmorethan10percent.
AGRICULTURALSECTORIndianagriculturalyieldslagthehighestyieldsfoundelsewhereintheworld.Outlook-Thebetterrainfallthisyearhasleadtofarhigheragriculturalgrowth.TheCentralStatisticalOrganisation(CSO)hasreportedthatIndiasfarmsectorgrewby2.5%and4.4%inthefirsttwoquartersofthisyearandwiththegoodrainyseasonthisyearandtheexpectationofgoodrainsnextyeartoo,theoutlookforIndianagriculturein2011isgood.AccordingtothemonsoonforecastsbytheMeteorologicalDepartment,cropoutputisexpectedtoshowastrongreboundin2010/11.
Ex
INDUSTRIALSECTORTheGeneralIndexofIndustrialProduction(IIP)hasposteddoubledigitgrowth
ratedrivenbysimilargrowthratesinoutputinthemanufacturingandminingsector.Manufacturingoutputgrowthin2009/10wasstronginallthequarters,especiallyinthecaseofcapitalgoodsanddurableconsumergoodswhilegrowthinnon-durableconsumergoodswereimpactedbypoorexportgrowthandaloweroutputofsugar.Outlook-IndustrialperformanceinIndiain2011willbeinfluencedmorebyexternalfactorsthanthedomesticcircumstances.DomesticconsumptionandeconomicrecoveryinEuropeandNorthAmericawillplayahugepartinindustrialgrowthinIndia.Industrialgrowthin2011isforecastedtobebetween6-7percentwithsignificantdownsiderisks.Overall,GDPintheindustrialsectorisforecastedtoexpand9.6percentin2010/11,risingto10.3percentin2011/12.
Ex
CONSTRUCTIONSECTORServicessectorgrewto57percentofGDPby2009-10.TheservicesindustryinIndiaiswelldiversifiedduetowhichoverallgrowthinthesectorhasbeenresilienteventhrougheconomictroughs.Outlook-Theoutlookforservicesin2011isgoodtotheextentthattheIndianfinancialsystemisnowherenearlyasexposedtothefinancialinstrumentsorthelooselendingthatmanywesternbankswereinvolvedin.Overall,non-farmsectorGDPgrewby8.8percentin2009/10.Theexpansionintheservicessectorisexpectedtoapproach9percentin2010/11andinchupto9.6percentin2011/12.Overall,thenon-farmsectorisexpectedtogrowby9.2percentin2010/11and9.8percentin2011/12.
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SERVICESECTORServicessectorgrewto57percentofGDPby2009-10.TheservicesindustryinIndiaiswelldiversifiedduetowhichoverallgrowthinthesectorhasbeenresilienteventhrougheconomictroughs.Outlook-Theoutlookforservicesin2011isgoodtotheextentthattheIndianfinancialsystemisnowherenearlyasexposedtothefinancialinstrumentsorthelooselendingthatmanywesternbankswereinvolvedin.Overall,non-farmsectorGDPgrewby8.8percentin2009/10.Theexpansionintheservicessectorisexpectedtoapproach9percentin2010/11andinchupto9.6percentin2011/12.Overall,thenon-farmsectorisexpectedtogrowby9.2percentin2010/11and9.8percentin2011/12.
INDIA:RISKASSESSMENTRISKTYPEJANUARY2011
SovereignriskCurrencyriskBankingsectorriskSource:India:CountryrisksummaryPoliticalriskEconomicstructurerisk
BBBBBBBBBBBB
FISCALDEFICITTRENDS(IN%OFGDP)12%10%8%6%4%2%0%Source:MinistryofFinance
2004-052005-062006-072007-082008-092009-102010-11
StatesFiscalDeficitOff-BudgetLiablitiesCentresFiscalDeficit
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TRENDSININDUSTRIALOUTPUT(UNIT:PERCENT)SectoralClassificationGeneralManufactureElectricityMiningBasicgoodsCapitalgoodsUseBasedClassificationInterConsumermediategoodsgoodsTotal2007/08Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42007/082008/092009/102010/11DurablesNon-Durables
10.38.78.36.75.34.70.80.83.89.013.415.18.52.810.19.8
11.18.98.97.35.84.90.50.33.49.214.616.09.02.810.510.1
8.37.14.65.52.03.22.93.06.07.43.86.76.42.85.87.5
2.77.45.55.24.03.82.00.96.89.010.312.75.22.69.78.0
9.49.35.04.72008/09
19.121.320.812.27.913.23.85.02.08.621.641.118.07.320.028.0
9.310.58.97.12.6-1.7-5.8-3.27.411.719.317.18.9-2.113.56.3
9.02.26.26.88.66.63.31.2-0.510.112.57.56.14.77.38.5
-0.7-5.52.10.13.510.8-1.85.615.623.733.731.5-1.04.525.116.5
12.45.17.68.910.15.14.9-0.1-5.35.16.00.28.54.81.65.3
3.14.72.40.42009/10
6.35.96.110.17.02.67.35.7
Source:EAC,GovofIndia
AVERAGESECTORALCONTRIBUTIONSTOECONOMY(%CHANGE)
Agriculture,hunting,forestry,fisheriesManufacturing
BrazilChinaRepublicofKoreaRussianFederationIndiaMexicoSouthAmerica,excl.BrazilsouthAsia,excl.Indiasouth-EastAsiaNorthAfricaCentralEuropeCIS,excl.RussianFed.-10123456
BrazilChinaRepublicofKoreaRussianFederationIndiaMexicoSouthAmerica,excl.BrazilsouthAsia,excl.Indiasouth-EastAsiaNorthAfricaCentralEuropeCIS,excl.RussianFed.87-1012345687
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FDIIndia,whichwasaminorglobalFDIplayerin2000,ispresentlytheworldsthirteenthlargestFDIhostcountry.Presentlyservicessectoraccountsforapproximately61%ofIndiasannualFDIinflowsandmanufacturingaccountsfor27%,whileprimarysectoractivities(primarilyminingandpetroleum)accountsfor9%approximately.Eightypercentofpost-2000FDIinflowshavebeenintheformofGreenfieldinvestments.TheaverageinvestmentsizealsoquadrupledfromUS$9milliontoUS$34millionoverthisperiod.
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SectorsattractingFDIinflows(%Share)4%4%6%30%3%
Whilethelargestrecentgreenfieldinvestmentsspanvarioussectors,thelargestrecentM&Asfocusontelecommunications,energyandpharmaceutics/healthcaresector.In2010/11and2011/12analystsforecastacontinuedexpansionofnetFDIto$30billioninbothyears,portfoliocapitalinflowsof$25billionand$35billionandasteadyincreaseinnetloancapitalinflowsto$17and$25billionrespectively.Overall,ourestimatesforcapitalinflowsare$73billionin2010/11and$91billionin2011/12.Thiswouldbeadequatetofinancethelargecurrentaccountdeficitinthetwoyearsandleaveamodest$31and$41billion(2.0and2.4percentofGDP)tobeabsorbedintheforeignexchangereserves.
7%
10%12%12%12%
OffshoreopportunityDespiteIndiaaccountingfor51percentmarketshareoftheoffshoringmarket,thereisstilltremendousspaceforgrowthascurrentoffshoringmarketisstillasmallpartoftheoutsourcingindustry.IndiancompaniesareexpectedtofocusonmainlandEuropetotapgrowthopportunitiesintheoffshoretechnologyse
rvicesmarketworthtensofbillionsofdollars.AccordingtoGartnerResearch,thecountrystechnologyservices,dominatedbyITservicesexportsworthUSD60billionwilltouchUSD3.6trillionin2011.
ServiceSectorComputerSoftware&HardwareTelecommunicationsHousing&RealEstateConstructionActivitiesPowerAutomobileIndustryMetallurgicalIndustriesPetroleum&NaturalGasChemicals
6000052398
50000
40000
30000
2000011557
10000
92046269528946314498290318701828
0
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au
rit
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ExportsIndiasexportsshowedanextraordinaryannualgrowthof36.4%whichwashighestin33-monthwithconsignmentsinDecember2010raisingprospectsofthecountryexporting$215-225billionworthofmerchandiseinthecurrentfiscal.IndiExportsinDecemberaggregated$22.5billion,whileimportscontractedby11.1%to$25.1billion,resultinginanarrowtradedeficitof$2.6billion,thelowestinthree-year.
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CountriesattractingFDIinflows(%Share)4%5%5%3%2%2%
In2010/11,analystsforecastthevalueofcrudeoilimportstobehighduetoincreaseincrudepricesbyalmost15percentandanincreaseinthequantitiesimported.Theoilimportbillisexpectedtoriseto$103billionin2010/11andto$120billionin2011/12.Amongstthenonoilimports,acomparativelyslowergrowthisexpectedinthecaseofgold,silverimportsandastrongergrowthintheremainingsegments.
6%
52%
9%
12%
Theoverallmerchandiseimportsonbalance-of-paymentsbasisareexpectedtorisetonearly$354billion(up18percent)in2010/11and$414billion(up17percent)in2011/12.Ontheexportside,petroleumproductswouldbeslightlyhigherthanthatofimportsat24and16percentin2010/11and2011/12respectivel
y.
MauritiusSingaporeUSAUKNetherlands
JapanCyprusGermanyFranceUAE
1008060Growth(inpercent)
40200-20-40Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10
ExportsImports
-60
BESTINVESTMENTOPTIONSFOR2011TheIndianSecuritiesmarketremainedstableduring2009-10,astheglobalmarketstoowitnessedimprovedstabilitywithanindicationofprospectsoffirmrecovery.However,fiscalconcernsremainstrongassovereignriskscontinuetobeacauseofconcerninsomeEuropeancountries.
PrimarySecuritiesMarketandSecondarySecuritiesMarketIndianprimarymarketwitnessedrenewedactivityintermsofresourcemobilisationandnumberofissuesduring2009-10,buildingitfurtherfromitsrelatively
subduedpacein2008-09.Inviewoftherecoverywitnessedinequitymarketspostglobalfinancialcrisis,companiesenteredtheprimarymarketandinvestorsresponsetopublicissueswasencouragingin2009-10whencomparedto2008-09.Secondarymarketalsowitnessedrevivalfollowingsharpfallinthepreviousyearinthewakeofglobalfinancialcrisisthathadplungedglobalequitymarkets.Investors
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240001900014000
200001800016000140001200010000Aug-10Dec-09Feb-10Jun-09Jun-10Aur-09Apr-09Apr-10Oct-098000
Rscrore
90004000-1000-6000-11000
FIIInvestmentMutualFundInvestment
AverageBSESensex(RHS)
regainedconfidenceandtheIndianmarketralliedpostannouncementofgeneralelectionresultsduringMay2009.
EquityGrowthDuring2009-10,alltheequitymarketswitnesseduptrend,however,indifferentmagnitude.TheIndianbenchmarkindicesnamelyBSESensexandS&PCNXNiftygaveyearonyearreturnof80.5percentand73.8percentrespectivelyin2009-10.TheBSESmall-capindexrecordedanincreaseof161.7percentin2009-10.Amongthesectoralindices,highestincreasewasrecordedbyBSEMetalindex(210.2per
cent),BSEConsumerDurables(159.7percent)andBSEAutoindex(150.6percent).Whilethemetalindexreflectedthestrengtheningofmetalprices,thegeneralupwardtrendintheeconomyandindustrialproductiongotreflectedinincreaseinthecapitalgoodsandautoindices.Theequitymarkethasenteredterritorythatitoccupiedexactlytwoyearsagoandinsimilarfashionthelevelofthestockmarket(theBombaySensitiveIndexorSENSEX)iscloseto21,000.Relativevaluationsareontherichersideandhenceanalystsexpectmoderationinindexreturnsfor2011(inthe10-15percentzonefromcurrentlevels).
InvestmentsinMutualFundsMutualfundsafterwitnessingredemptionpressuresduringlaterhalfof2008-09postglobalcreditcrisiswitnessedrenewalofinvestorsinterestintermsofmobilizationofresourcesthroughnewfundofferingsaswellasexistingschemes.T
hegrossmobilisationofresourcesbyallmutualfundsduring2009-10wasatRs.100190billioncomparedtoRs.54263billionduringthepreviousyearindicatinganincreaseof84.7percentoverthepreviousyear.Redemptionalsoroseby82.2percenttoRs.99359billionin2009-10fromRs.54546billionin2008-09.Allmutualfunds,puttogether,recordedanetinflowofRs.830billionin2009-10ascomparedtoanoutflowofRs.282billionin2008-09.Theassetsundermanagementbyallmutualfundsincreasedby47.2percenttoRs.6139billionattheendofMarch2010fromRs.4173billionattheendofMarch2009.
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PEandVentureCapitalInvestmentsTheyear2011islikelytowitnessmaximumnumberofprivateequity/venturecapitalexitsinthehistoryofIndianPEindustry.Thetypicalcycleofinvestment-exitisexpectedtogetcompletedin2010-11formanyPEinvestorsinIndia.Privateequityfirmsexitedarecord121companiesinIndiaduring2010,whileinvestmentsalmostdoubledto$7.97bnfromthe2009figure.VenturecapitalandprivateequityinvestmentsinIndiahadwitnessedaphenomenalgrowthbothintermsofamountinvested(from$1.8billionin2004to$22billionin2007beforetaperingoffto$8.1billionin2008)aswellasthenumberofdeals(from80in2004to481in2007andthenslowingdownto297in2008).TherewerehugePEinvestmentsintechnology-led,capitalintensivesectorslikeTelecom,PowerandInfrastructureinadditiontothosesectorsthatweretraditionallypreferredbyVCPEinvestorslikeIT&ITES,Healthcare,etc.PrivateEquityfirmsinvested$7,974millionover325dealsinIndiaduringthe12monthsendingDecember2010,comparedto$4,068millionacross290dealsduringthepreviousyear,accordingtoanalysisbyVentureIntelligence,aresearchservicefocusedonPrivateEquityandM&Aactivity.(ThesefiguresincludeVCinvestmentsandexcludePEinvestmentsinRealEstate).With34investmentsworthabout$2,141million,Energycompaniestoppedintermsofinvestmentvalueduring2010,whileInformationTechnologyandIT-EnabledServices(IT&ITES)with79investmentsworth$696milliontoppedintermsofvolume.BFSIwith44investmentsworth$1,054millioncamesecondonbothparameters.
IPOsin2010IndianIPOmarkethaswitnessedastrongcomebackin2010aftersluggishperformancein2009asmostofthecompaniesrushedtocapitalmarketstoraisefundsonencouragingstockmarkets.JubilantFoodWorks,ThangamayilJeweller,TalwalkarsBetterValueFitnessemergedastop3performersin2010.Meanwhile,CoalIndiaandMOILweremostsuccessfulIPOswhichreceivedoverwhelmingresponsefrominvestorcommunity.IPO2011ScenarioIndiaIPO2011outlookseemsbrightwithatleast100publicissuesinthepipeline,withanindicativesizeofaroundRs400billion.IfthegovernmentmaintainsitsRs400billiontargetforthenextfiscaltoo,totalmaybeRs900billion,up27%from2010.ThirtyfiveprospectuseshavealreadygottheSEBIsclearance,whiletheremainingsixtyfiveareawaitingnod.ThecountryalsocelebrateditsbiggestIPOeverthisyearwiththeworl
dslargestcoalproducerCoalIndia,collecting$3.5billioninOctober.Bigprivatecompanies,likeJindalPowerandSterliteEnergywhichareplanninganinitialpublicofferingin2011,mayhavetolowervaluationexpectationsasinvestorsturnchoosy,afterprofitingfromstate-ownedcompaniesissuesthatwerepricedattractively.IPOoutlookfortheyear2011willseeamassivebunchofissueshitthemarketunlikebeforeandtheissuerswillhavetopricetheirtrademoresensiblytoattractinvestorattention.
CorporateBondMarketThenumberoftradesincorporatebondsduring2009-10roseby68.5percentincomparisonto2008-09.Incomparisontoincreaseinnumberoftrades,increaseinthevolumeoftradesduring2009-10isverysignificant.ThisincreaseismainlyattributedtoincreaseinvolumeoftradesreportedatFIMMDAby218.5percent
followedbyNSEat206.9percentandBSEat42.9percent.
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JPMorganIndiaSmallerCompaniesFund-GrowthMorganStanleyA.C.EFund-GrowthMorganStanleyGrowthFund-GrowthPramericaEquityFund-GrowthPRINCIPALDividendYieldFund-GrowthPrincipalEmergingBluechipFund-GrowthPRINCIPALGrowthFund-GrowthPRINCIPALIndexFund-GrowthTempletonIndiaEquityIncomeFund-GrowthTempletonIndiaGrowthFund-Growth
-12.92-11.2-11.74-10.24-10.22-13.69-11.41-10.29-5.56-9.87
-16.98-13.8-14.64N/A-14.89-17.82-13.79-10.47-4.73-11.89
-7.05-3.17-1.86N/A-1.39-7.6-4.311.2410.210.86
12.1810.6910.35N/A14.214.964.2811.7621.3312.23
-5.91N/A-0.19N/A4.81N/A-8.120.0410.689.19
Note:Performancestilldate
FUNDSSTATUSININDIA
FundName
No.ofSchemes*
AssetUnderManagementAson
BillionRupeesCorpusAsonCorpusNetinc/decincorpus
AIGGlobalInvestmentGroupMutualFundAxisMutualFundBarodaPioneerMutualFundBenchmarkMutualFundBhartiAXAMutualFundBirlaSunLifeMutualFundBNPParibasMutualFundCanaraRobecoMutualFundDaiwaMutualFundDeutscheMutualFundDSPBlackrockMutualFundEdelweissMutualFundEscortsMutualFundFidelityMutualFundFranklinTempletonMutualFundHDFCMutualFundHSBCMutualFundICICIPrudentialMutualFundIDBIMutualFundIDFCMutualFundINGMutualFundJMFinancialMutualFundJPMorganMutualFundKotakMahindraMutualFund
453933184523811990111331263930791632018337912201858837152
31-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-10
8.8350.1329.6129.354.12576.8950.2173.921.3562.85276.682.142.0389.01394.4878.8347.29658.4120.52173.4813.8664.5451.96265.89
30-Sep-1030-Sep-1031-Oct-1030-Nov-1030-Sep-1031-Oct-1030-Sep-1030-Sep-1030-Sep-1030-Nov-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Nov-1030-Sep-1030-Sep-10
10.2046.3641.3929.905.11613.5549.6577.193.1965.21266.742.151.9885.36421.42931.0648.10697.2822.00183.9814.6863.3084.48284.30
-1.373.77-11.78-0.55-0.99-36.660.56-3.26-1.84-2.369.94-0.010.053.65-27.00-52.22-0.81-38.87-1.48-10.51-0.821.24-32.52-18.41
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L&TMutualFundLICMutualFundMiraeAssetMutualFundMorganStanleyMutualFundMotilalOswalMutualFundPeerlessMutualFundPramericaMutualFundPRINCIPALMutualFundQuantumMutualFundRelianceMutualFundReligareMutualFundSaharaMutualFundSBIMutualFundSundaramMutualFundTataMutualFundTaurusMutualFundUTIMutualFund
816233122241472112421104415517518356227
31-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-1031-Dec-10
31.93186.953.2823.613.0123.0611.0957.641.171020.66104.113.16414.98145.29208.5525.33653.87
30-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Nov-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Sep-1030-Nov-1030-Sep-10
35.43197.272.7523.513.0520.946.3056.421.191077.49107.807.56421.00142.41219.6423.68676.18
-3.50-10.320.530.10-0.042.114.781.22-0.03-56.82-3.69-4.40-6.032.88-11.091.65-22.30
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InvestorspreferIndianstocks,alucrativebargainBettingonemergingmarketscouldyieldlucrativebargainsandbesaferthanstandingpatintheUnitedStatesandriskingadoubledip,hedgefundmanagerssaid.Investorsarenowlookingforundiscoveredcompaniessoastomakemoremoneyratherrelyingonmarketwhicharetermedmoreefficient.
CONCLUDINGREMARKSTheoverallperformanceoftheIndianeconomyin2009/10wasbeyondexpectations.Thefarmsectorwhichwasforecastedtocontractshowedresilience,growingby0.2percentdespitetheweakSouthWestmonsoon.Thenon-farmsectoralsofollowedthesamelinewithstrongperformance.ItisestimatedthattheIndianeconomywouldgrowat8.5percentin2010/11and9.0percentin2011/12.Inthecurrentfiscalyear,agriculturewillgrowat4.5percent,industryat9.7percentandservicesat8.9percent.Thebeginningofthenewdecadeheraldstheslow,butsteadyendoftheworstrecessioninthepast60years.GlobalGDP,afterdecliningby1.1percentin2009,ispredictedtoincreaseby3.1percentin2010,and4.2percentin2011,withdevelopingeconomiesgrowingthriceasfastasthedevelopedeconomies.
Disclaimer-Allinformationusedinthepublicationofthisreporthasbeencompiledfrompubliclyavailablesourcesthatarebelievedtobereliable,howeverwedonotguaranteetheaccuracyorcompletenessofthisreport.Thisisnotas
olicitationorinducementtobuy,sell,subscribe,orunderwritesecuritiesorunits.Thisdocumentisprovidedforinformationpurposesonlyandshouldnotbeconstruedasanofferorsolicitationforinvestment.Thisdocumenthasnotbeenpreparedinaccordancewiththelegalrequirementsdesignedtopromotetheindependenceofinvestmentresearchandisnotsubjecttoanyprohibitionondealingaheadofthedisseminationofinvestmentresearch.Itmaybedifficultornotpossibletobuy,sellorobtainaccurateinformationaboutthevalueofsecuritiesmentionedinthisreport.Pastperformanceisnotnecessarilyaguidetofutureperformance.
ThisreportisproducedbyInternationalBusinessTimesForquestionsorcommentsreachusatresearchanalysis@ibtimes.comFormoreinformationaboutourproductsvisitwww.ibtimes.com
IBTimes2011.Allrightsreserved.
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