Indias capital market investment optionsA PresentationNovember 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 Indias growth rate has surpassed some of the developed economiesGDP at current market prices is over US $778 billion

Indian Economy and Capital Market at a glanceForeign 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 glanceGeneral permission granted to the Indian companies for issuing rights/bonus shares to the existing nonresident shareholders subject to adherence to sect oral capIndian companies may issue shares under Employee Stock Option Scheme to its employees who are resident outside

Indian Economy and Capital Market at a glanceAn Indian company can raise foreign currency resources overseas through ADRs or GDRsForeign 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 glanceInvestments can be made through foreign venture capital fundsPrivate equity is allowed as an alternative form of investmentQualified 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 glanceFIIs 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 glanceMarket capitalization of Rs.34,62,692 crore or over US $ 770 billion as on November 17, 2006India is the worlds 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 22.01NSE (Indias 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 GlanceIndia 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 tradeOver 7000 listed companies on the stock exchanges largest in the world

Indian Economy and Capital Market at a Glance9040 brokers in cash segment and 1064 in derivative segment of the market122 investment bankers in the market58 under writers to support primary issues34 foreign venture capital funds 120 Portfolio managers

Indian Economy and Capital Market at a Glance11 custodian banks2 depositories with over 9 million beneficiary owner accounts120 Portfolio managersNumber of traders at 20 million Number of internet trading clients at 1.44 millionInternet 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 centYear 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 GlanceCumulative assets of mutual funds over US$68 billionIndia launches Capital Protection Fund and Gold Exchange Traded FundsAbout 1000 foreign institutional investors

Indian Economy and Capital Market at a GlanceInvestors by foreign institutional investors at over $50 billionAt 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 Institutional investors in India

Indian Economy and Capital Market at a Glance

FIIs can invest on behalf of their clients through sub-accountsFor 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 GlanceFIIs could also be dedicated debt funds who can invest up to 100 per cent in debtFIIs 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 firmsEconomists project India to become the third largest economy in the world by 2040Indian 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 regulationDisclosure and Investor Protection guidelines availableIndias 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 companiesMutual funds are permitted to invest overseas up to $3 billionMargin 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 vogueClearing houses and corporations with novation in placeAlmost 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 upIndia to set up a world class National Institute for Securities Markets with 7 business schools under its fold