Beruflich Dokumente
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CHARAK RAY
libra.charak@gmail.com
INDIAN FINANCIAL MARKET
In recent years, the Indian economy has seen a great transformation
from a closed, controlled, slow growing economy to a more open,
liberalized and one of the fastest growing economies of the world.
The main impact of the global financial turmoil in India has emanated from the
significant change experienced in the capital account in 2008-09so far, relative
to the previous year. Total net capital flows fell from US$17.3 billion in April-
June 2007 to US$13.2 billion in April-June 2008.
Foreign institutional investors (FIIs) witnessed a net outflow of about US$ 6.4
billion in April-September 2008 as compared with a net inflow of US$ 15.5
billion in the corresponding period last year.
External commercial borrowings of the corporate sector declined from US$ 7.0
billion in April-June 2007 to US$ 1.6 billion in April-June 2008
The primary market has had a direct relation with the secondary market. The
Bull Run in the secondary market has in the past enabled and emboldened
companies to enter the market with big issues and attract investors and traders
to invest in public issues to reap high profits following their listing.
The BSE Sensex increased significantly from a level of 13,072 as at
end-March 2007 to its peak of 20,873 on January 8, 2008.
However with portfolio flows reversing in 2008, partly because of
the international market turmoil, the Sensex has now dropped to a
level of 11,328 on October 8, 2008, in line with similar large
declines in other major stock markets.
The impact of FIIs is so high that whenever FIIs tend to withdraw the money from
market, the domestic investors become fearful and they also withdraw from
market.
In case of January 18, 2008, the Sensex lost almost 687 points. Here, the net sales
by FIIs were Rs. 1348.40 Crores. This is a major contributor to the fall on that
day.But contrary to that day, take the case on January 21, 2008, the Sensex lost
1408 points and the gross sales was Rs. 1060.30 Crores and the purchases were
Rs. 3062.00 Crores. So this can be concluded that after the fall of market, FIIs had
invested again into the market.
Depreciation in rupee value has added to the worries of FIIs. Depreciation in
currency leads to losses (in dollar terms) for the FIIs, as they have to periodically
represent to market value of their investments overseas. Many speculate the fear of
depreciation of rupee even more against the dollar. If that happens, FIIs will have
to report huge losses on the currency account, and hence are pulling out from the
domestic markets.
From the above data, it can be noted:
Increase in net investments till 2005.
Small decrease in investments in the year 2006, but there was a steep
increase in the year 2007-08. This was the best period in Indian stock
market where stock prices got increased and the market was in good mood.
In early 2008, the government liberalized its policy towards
foreign investment in the following key economic sectors by
increasing the maximum permitted foreign investment to:-
The move was aimed to keep track of foreign flows into the
country. However SEBI has removed the existing limit on
distribution of FII investment a day after the government doubled
the cap on their investment in corporate debt to $6 billion. This
was a result of FII’s pulling out of the Indian equity market
(US$11.56 billion) and pumping money in the debt market
(US$1.8 billion).
So far as security receipts issued by the Asset Reconstruction
Companies (ARCs) are concerned, the total holding of a single FII
in each tranche of scheme must not exceed 10 per cent of the
issue.
Besides, the total holding of all FIIs put together must not exceed
49 per cent of the paid up value of each tranche of scheme of
security receipts issued by ARCs.
This will also enable Indian companies to get more funds for their
expansion plans
A STEP TOWARDS INTEGRATION
OF THE MARKETS
The bank will hold shares of the foreign issuer and issue
depository receipts to U.S. investors, who will thereby achieve the
convenience of denominated trading. These depository receipts
then may (or may not) be listed on a Stock exchange.
Other suggestions:
Focus more on growth by improving public and private investment
continue to take measures for improving liquidity enhance
investor confidence to ensure growth of industry.
Emerging Asia has become the ‘growth centre’ of the world due to
shifting of production base to the region.
THANK YOU…