the impact of globalisation on the indian investment

8/19/2019 The Impact of Globalisation on the Indian Investment

1/19

Globalisation on theIndian Investment

Markets

Group 10

Jeet Juneja F20Himanshu Gar F1!

"aar "onkar F!!

#ratin $utta F%&


2/19

Introduction

• The term 'Globalisation( means interation ofeconomies and societies throuh cross)countr*+o,s of information- ideas- technoloies- oods. services- capital- /nance and people

• Globalisation occupies a sini/cant place in theeconomic development of an* countr* as itpromotes faster economic ro,th

• periences sho,ed that lobalised countries/nancial markets improved their economicperformance at a much faster pace


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The scenario post)independence

• Most of the public sector units ,ere /nanced b*overnment and banks

• #ank intermediation ,as ver* stron

• "tock market tradin ,as lackinprofessionalism

• In 1330s due to the deterioration of forein

echane reserves and economic instabilit*- ,e,ere forced to devalue our currenc* and ,entfor liberali4ation- privati4ation and lobalisationmeasures especiall* in the /nancial sector


4/19

The chanes

• Industrial licensin ,as made eas*

•

Forein Institutional Investors 5FIIs6 ,ereallo,ed to participate in the e7uit* market

• "#I ,as established on par ,ith "ecuritieschane 8ommission 5"86 of the 9":

• :bolition of overnment control on pricinof securities

• emption of dividend income from incometa


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8ontd;

• "ettin up of reulator* bodies like "#I

and various credit ratin aencies• "tep to,ards scrip less tradin s*stems

• 8omputeri4ation of dealins

•


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Major /ndins

• The eponential ro,th rate of real G$Abefore lobalisation- sa* 1331 ,as %;B andpost lobalisation sho,ed C per cent ro,thrate

• The total risk in investment in e7uities can bereduced b* investin in diversi/ed portfolio

•Market 8apitalisation ratio has touched 1;11per cent in 200!)0% and no, it is on par ,ithinternational standards


7/19

Findins about theprimar* markets

• Desource mobili4ation throuh primar* capital markethas eperienced a substantial jump in nineties due to

lobalisation of stock market- spurtin from Ds; 1!213crores in 1330)1331 to Ds;10%3!! crores in 200!)0%

• The pattern of resource mobili4ation throuh primar*market has underone a sea chane ,ith the privateplacement route eclipsin the Initial Aublic o@er 5IAE6route

• The corporate sectors dependence on the securitiesmarket for eternal /nancin increased from 13;B% percent in 1330)31 to BB;% per cent in 1333)2000


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Desource mobili4ation throuh theArimar* market 5 #" . >" 6

Mode 2009-2010 2010-2011 2011-2012 2012-2013

$ebt 2%00 3!%1 B%C11 !3&!

7uit*

Ef ,hichIAEs>o; of IAEsMean IAEsi4e

!C&BC

2!C3CB3CBB

!C%!

B%%%3%BC&1

12%&

%30!B!1&!

1B0%0

C0!B20B02

ArivateAlacement 212C%B 21&% 2C122 2CBC!!

Total 2C1&1 2&C30 B03&%0 21CC&"ource "#I

Ds; 8rores


9/19

Date Event

1332 "#I :ct established

133B >" ,as reconi4ed as a stock echane

133% #" En line Tradin 5#E?T6 s*stem introduced

133& #E?T epanded nation ,ide

1333 8entral $epositor* "ervices ?td; 58$"?6 ,asestablished

1333 Interest rate s,aps5ID"6For,ard Date :reement5FD:6 allo,ed

2000 7uit* $erivatives Introduced

2001 "tock Eptions launched

2002 Funibilit* of :$DGD$

200& ?aunch of Indian 8orporate $ebt market

200 8urrenc* $erivatives introduced 2003 #" ?aunches #" "t:D MF Mutual Fund tradin

platform

2003 ?aunch of clearin and settlement of 8orporate #onds

2010 8ommencement of olatilit* Inde

2012 ?aunch of #" ) "M chane Alatform


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Ether chanes in theIndian capital markets

• :n empirical stud* has sho,n that capitalmarket reforms that started in the 1330scontributed to the development of thestock markets in India

• Market capitali4ation ratio- value tradedratio and turnover ratio have increased

• These indicators toether ,ith thedecline in volatilit* are an evidence ofstock market development in India


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: stud* b* Mckinse* onthe chanes

• Mckinse* points out that till 2001- the

reforms had not produced much/nancial deepenin

• The total value of the /nancial assetsnever eceeded the G$A b* more than10 till then

• Then deepenin started in a major ,a*and b* 200!- the total value of the/nancial assets stood at a respectable1C0 of the G$A ,hich further

eploded to B0% in 200&


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"tud*s /ndinscontinued;;

• This meant a 8:GD of about 11 bet,een 2001 and200&

• $urin this period the e7uit* markets sho,ed the moststunnin increase5 from 2B of G$A to 1C%- a 8:GDof B36

• corporate bonds sho,ed e7uall* remarkable ains buton an insini/cant base 51 to &;BN a 8:GD of B3658hakrabarti- 20106

• Government securities sho,ed a relativel* moderaterise 52& to CBN a 8:GD of 1%6 ,hile #ank depositsrose at a snails pace 5%& to C3N a 8:GD of B6;


13/19

?o, penetration levels ofthe /nancial services sector

• There needs to be a riorous e@ort to ade7uatel*etract the full potential of Indias savins- ,hich

stands at an impressive B! of the G$A• :s on Jul* 2011- onl* 1 of households had invested

in mutual funds and a mere 0;&2 of households ine7uit* shares

• The corporate bond market has remained relativel*

underdeveloped;• This has been the result of dominance of the bankin

s*stem combined ,ith the ,eaknesses in marketinfrastructure and the inherent compleities;


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TH "?EO $EO> :FTD THG?E#:? FI>:>8I:? 8DI"I"

• ver since the Indian conom* ,as liberali4ed- Indiahas seen a tremendous ro,th of its capital markets

,ith close to %-000 Initial Aublic o@erins 5IAEs6• In the *ear 2010- India ranked !th ,ith respect to the

amount of capital raised- contributin to B;& ofGlobal IAE share- 8hina contributed to almost !& ofthe Global 8apital raised in IAEs

• This seemed to indicate that the Indian 8apital Marketis losin its ro,th momentum in the post crisis/nancial ,orld and that china is increasinl* becominpopular ,ith respect to attractin forein capital


15/19

Trends in ForeinInvestment In+o,s 9" P

Million


16/19

Future Arospects

• :fter the shock of the lobal /nancial crisis- emerinas ,ell as developed economies are tr*in to /ure out

,hether openness is necessar* for a health* /nancialsector

• India has a choice bet,een t,o path,a*s- as to ho, toproress in the future

• The t,o path,a*s are- either to Qretreat from thecurrent position of further liberali4in the /nancialsector- ,hich ,ould eventuall* result in lo,er ro,th-or either to Qadvance for,ard ,ith raduall*liberali4in but at the same time reulatin andcontrollin the cross border capital +o,s


17/19

Future Arospectscontinued

• The Qretreat scenario is one ,hich isshaped b* a hih deree of risk aversionRone that ma* s7uee4e the /nancin neededfor investment in innovation and D.$-business epansion- infrastructure- housin-education- and human capital development

•If the trend of retreat is to be chosen- the

value of /nancial assets relative to G$A,ould remain +at or even decline b* 2020


18/19

Future Arospectscontinued

• Greater interation of the Indian capital marketo@ers four principal- and inter) related- bene/ts)

• #etter allocation of capital

• more e@icient risk sharin

• enhanced portfolio diversi/cation and lo,er cost ofcapital

• Greater participation from Global InstitutionalInvestors assures reater li7uidit* and enhancedreputation of the market- leadin to better

valuations of companies listed on Indian chanes


19/19

Thank You

the impact of globalisation on the indian investment

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