US IVCA India Capital Market Presentation

WELCOME TOPRESENTATIONONSTATE OF INDIAN CAPITAL MARKET : WELCOME TO PRESENTATION ON STATE OF INDIAN CAPITAL MARKET by. G .N. Bajpai Former - Chairman SECURITIES andamp; EXCHANGE BOARD OF INDIA andamp; LIFE INSURANCE CORPORATION OF INDIA On 14th OCTOBER ‘2005 At US – IVCA Palo – Alto, LA


STRUCTURE OF PRESENTATON : STRUCTURE OF PRESENTATON State of the Market Drivers Economic Factors Macro Global Micro Market Efficiency Regulators Philosophy Perspective Prescriptive Potential


STATE OF MARKET : STATE OF MARKET Market Performance Ratios Volume Number of trades Amount Market Capitalization FII Investment


MARKET PERFORMANCE : MARKET PERFORMANCE


MARKET PERFORMANCE : MARKET PERFORMANCE


RATIOS : RATIOS


NUMBER OF TRANSACTIONS A COMPARISON : NUMBER OF TRANSACTIONS A COMPARISON


STOCK INDEX FUTURES : STOCK INDEX FUTURES


SINGLE STOCK FUTURES : SINGLE STOCK FUTURES


CAPITAL MARKET : CAPITAL MARKET


EQUITY : EQUITY


DEBT : DEBT


DEBT : DEBT


FII INVESTMENT IN INDIA : FII INVESTMENT IN INDIA Simple and speedy registration process Minimum registration formalities 792 FIIs registered as on 30.09.2005 2139 sub accounts registered as on 30.09.2005 Cumulative FII Investment- US$ 38.96 bn.


Slide15 : FII PARTICIPATION FII Investment in USD Mn. More than 80 new FIIs registered from April 2004….UN Pension Fund, CalPERS


FII INVESTMENT : FII INVESTMENT


FII- COUNTRY OF ORIGIN : FII- COUNTRY OF ORIGIN


FII INVESTMENT : FII INVESTMENT


FII INVESTMENT IN INDIA : FII INVESTMENT IN INDIA One of top growing economy…GDP growth rate of over 6% in last decade India among top 3 Asian investment destinations in 'The 2005 World Investment Report' - UNCTAD Foreign portfolio investment of more than US $ 8 billion in the Years 2005 One of the best performing among emerging stock markets, in recent times


ECONOMIC FACTORS : ECONOMIC FACTORS Macro GDP growth Savings growth Interest rates Financial Stability Geo – political Growing Demand Global - Liquidity - Demand led growth


GDP GROWTH : GDP GROWTH


GDP GROWTH : GDP GROWTH


SAVINGS GROWTH : SAVINGS GROWTH


LIFE INSURANCE : LIFE INSURANCE


LIFE INSURANCE : LIFE INSURANCE


NON- LIFE INSURANCE : NON- LIFE INSURANCE


NON- LIFE INSURANCE : NON- LIFE INSURANCE


BANKING : BANKING


BANKING ( Cont) : BANKING ( Cont)


FINANCIAL STABILITY : FINANCIAL STABILITY


FOREX RESERVE : FOREX RESERVE


ECONOMIC FACTORS : ECONOMIC FACTORS Micro Firms Profitability Cost of Capital Productivity enhancement Competitive edge Dismantling of Administered rate investment instruments


MARKET EFFICIENCY : MARKET EFFICIENCY METAMORPHOSED MARKET


METAMORPHOSED MARKET : METAMORPHOSED MARKET


MARKET STRUCTURE (JULY 31, 2005) : MARKET STRUCTURE (JULY 31, 2005) 22 Stock Exchanges, 15 Subsidiaries Over 10000 Electronic Terminals at over 400 locations all over India. 9108 Stock Brokers and 14582 Sub brokers 9644 Listed Companies 2 Depositories and 483 Depository Participants 128 Merchant Bankers, 59 Underwriters 34 Debenture Trustees, 96 Portfolio Managers 83 Registrars andamp; Transfer Agents, 59 Bankers to Issue 4 Credit Rating Agencies


MARKET STRUCTURE (AUGUST 31, 2004) : MARKET STRUCTURE (AUGUST 31, 2004) Venture Capital Funds 21 Foreign 61 Domestic 38 Mutual Funds And 479 Schemes Asset Base: US $ 44.94 bn. 739 Foreign institutional investors Cumulative FII investment - US$ 36.76 bn


METAMORPHOSED MARKET : METAMORPHOSED MARKET


STOCK INDEX FUTURES : STOCK INDEX FUTURES


SINGLE STOCK FUTURES : SINGLE STOCK FUTURES


Quote from the Economic Survey 2003-04 Government of India : Quote from the Economic Survey 2003-04 Government of India ' The securities markets have made enormous progress in recent years. India’s equity market is now being increasingly recognized as a success story on the world scale'


METAMORPHOSED MARKET : METAMORPHOSED MARKET


INDIAN DISCLOSURE STANDARDS : INDIAN DISCLOSURE STANDARDS Initial and Continuous Disclosures norms of global standards ' India scores 100% as far as disclosure standards are concerned ' (What works in Securities Laws?: Rafael La Porta, Florencio Lopez- de-Silanes, Andrei Shleifer. www.nber.org/papers/w9882)


INDIAN ACCOUNTING STANDARDS : INDIAN ACCOUNTING STANDARDS Indian Accounting Standards: ‘Principle’ based. Aligned to International Accounting Standards. 'In terms of consolidation, segmental reporting, deferred tax accounting and related party transactions, the gap between Indian and US GAAP is minimal.' (CLSA - CG Watch; September 2004)


INDIAN ACCOUNTING STANDARDS : INDIAN ACCOUNTING STANDARDS Indian Accounting Standards – ‘Principle’ based. Aligned to International Accounting Standards. Indian Accounting Standards score a maximum of 3 according to CALPERS’ Permissible Equity Market Analysis (Disclosure Quality and Emerging Market Mutual Fund Investment: Reena Aggarwal, Leora Klapper, Peter D. Wysocki http://www.worldbank.org/research/bios/lklapper/mutual%20funds_AKW.pdf)


Quote from The Economic Intelligence Unit 2003 Study : Asian experience : Quote from The Economic Intelligence Unit 2003 Study : Asian experience 'Top of the Country class, as might be expected is Singapore followed by Hong Kong and, somewhat surprisingly, India where overall disclosure standards have improved dramatically, accounting differences between local and US standards have been minimized and the number of companies with a majority of independent directors has risen significantly.'


Slide46 :


Slide47 : 'India’s stock market regulatory authority, the Securities and Exchange Board of India (SEBI) continues to raise the bar for good corporate governance.'


METAMORPHOSED MARKET : METAMORPHOSED MARKET


METAMORPHOSED MARKET : METAMORPHOSED MARKET


CLEARING SYSTEM : CLEARING SYSTEM CENTRAL COUNTERPARTY clears all trades, determines obligations of members, arranges for pay-in of funds/securities, receives funds/ securities, arranges for pay-out of funds/ securities to members, guarantees settlement, and collects and maintains margins


METAMORPHOSED MARKET : METAMORPHOSED MARKET Indian Settlement System conforms to: CPSS-IOSCO Principles andamp; G-30 Recommendations


T+2 SETTLEMENT SYSTEM : T+2 SETTLEMENT SYSTEM


METAMORPHOSED MARKET : METAMORPHOSED MARKET


DYNAMIC RISK MANAGEMENT SYSTEM : DYNAMIC RISK MANAGEMENT SYSTEM Capital adequacy norms Trading and Exposure limits Margin requirements VaR based margins Mark-to-Market margin Index-based market-wide Circuit breakers Settlement guarantee fund On-line position monitoring Automatic disablement of Brokers’ terminal


Quote from Financial Times : Quote from Financial Times 'World’s biggest democracy can show Google how to conduct an online IPO' ….in India you cannot apply on the web but investors can access one of the world’s largest financial networks with 7000 terminals scattered around 350 cities. And every step of the book building process is public. …The Indian system is a refreshing example of a transparent IPO market but it is also a rare one, especially in the insider-friendly Asian markets'


REGULATORY PHILOSOPHY : REGULATORY PHILOSOPHY MANDATE


MANDATE : MANDATE 'PROTECT THE INTEREST OF INVESTORS IN SECURITIES AND TO PROMOTE THE DEVELOPMENT OF, AND TO REGULATE, THE SECURITIES MARKET AND FOR MATTERS CONNECTED THEREWITH OR INCIDENTAL THERETO' SEBI Act. EMERGENCE OF REGULATORY PHILOSOPHY Regulator’s focus should not be on the regulations but on the development of the Market. Regulations happen to be incidental to the developments.


PERSPECTIVE : PERSPECTIVE PRESCRIPTIVE POTENTIAL


PRESCRIPTIVE : PRESCRIPTIVE Market Depth Product Diversification Mortgage Backed Securities Assets Backed securities Warrants Vibrancy of Bond markets Co-ordination between trading platforms and OTC markets Disinvestment Market integration-convergence of Securities and Commodities markets Consolidation of regulation over listed companies Consolidated regulation over intermediaries Broadening market participation


PRESCRIPTIVE : PRESCRIPTIVE Capacity Building–Regulator and Industry-pillars of scalability and quality of intermediation Balance between Costs of regulation and market development Co-operation with Regulators–cross border and cross jurisdiction-building common standards of regulations


POTENTIALS : POTENTIALS Macro financial stability High Forex Reserve Low inflation Low interest rates High GDP Growth Projection Growing Prosperity Demand Disposable Incomes New breed Indian (global) entrepreneurs Indian Capital Market have the potential to deliver high rate of returns in medium to long duration.


Slide62 : THANK YOU