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DIAGNOSIS OF INDIAN FINANCIAL MARKETS (2000 to 2012)

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Road Map for Presentation

Introduction to Financial Markets

Indian Financial Markets

Basis of Diagnosis

Diagnosis with Facts & Findings

Conclusion

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Introduction to Financial Markets

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WHAT IS FINANCIAL MARKET ?

BORROWER

ISSUER OF FINANCIAL INSTRUMENTS

USERS OF FUNDS

•The Raising of Capital (Capital Markets)•The Transfer of Risk (Derivatives Markets)•The Transfer of Liquidity (Money Market)• International Trade (International Markets)

LENDER

BUYER OF FINANCIAL INSTRUMENTS

SUPPLIER OF FUNDS

FINANCIAL MARKETS

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INDIAN FINANCIAL MARKET

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ORGANIZATIONAL STRUCTURE & COMPONENTS OF STOCK MARKET

IndividualsCorporationsInstitutions

BanksGovernment

Supply of Money Capital

InvestorsLenders

1.New Issue Market2. Stock Exchange

3. Financial Institution

Intermediaries & Clearing House

IndividualsCorporationsInstitutions

EntrepreneursGovernment

Demand for Money Capital

Borrowers

BASIS OF DIAGNOSIS

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INFLATION GDP BUDGET DEFICIT CURRENT ACCOUNT BUSINESS CONFIDENCE DEBT TO GDP FIIs INVESTMENT IN EQUITY &

DEBT

INFLATION (COST OF LIVING INDEX)

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INFLATION ROSE BY 4% TO 16% FROM 2006 TO 2010. AND AFTER THAT IT CAME DOWN AND IT IS @ 6.87% IN JULY 2012.

FACTORS TO BE CONSIDER Inflation rate refers to a general rise in prices measured

against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy. 

The inflation rate in India was recorded at 6.87 percent in July of 2012. Historically, from 1969 until 2012, India Inflation Rate averaged 8.0 Percent reaching an all time high of 34.7 Percent in September of 1974 and a record low of -11.3 Percent in May of 1976

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GDP (GROSS DOMESTIC PRODUCT)

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FACTORS TO BE CONSIDER After analyzing the above trend, it is clear that GDP is under

pressure and sharp declining is looking from 9% to below 6% from 2010 to 2012.

The Gross Domestic Product (GDP) in India expanded 5.3 percent in the first quarter of 2012 over the same quarter of the previous year. Historically, from 2004 until 2012, India GDP Annual Growth Rate averaged 8.2100 Percent reaching an all time high of 10.1000 Percent in September of 2006 and a record low of 5.3000 Percent in March of 2012. 

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BUDGET DEFICIT

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FACTORS TO BE CONSIDER Government Budget is an itemized accounting of the payments

received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when an government spends more money than it takes in. The opposite of a budget deficit is a budget surplus.

After analyzing the budget deficit from 2000 to 2011-12, it is clear that budget deficit was stable between the range from -5 to -3 from 2000 to 2007 end but after 2007 it drooped more downward to negative @ -7.8% in Dec 08 which was very worst. But after that it stabilized and moved on negative cum positive side and further reported the nos @ -6.9, -5.1 & India reported a Government Budget deficit equal to -4.60 percent of the country's Gross Domestic Product in 2011.

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CURRENT ACCOUNT

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HURDELS

FACTORS TO BE CONSIDER Current Account is the sum of the balance of trade (exports minus

imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). Positive net sales to abroad generally contributes to a current account surplus; negative net sales to abroad generally contributes to a current account deficit.

The net factor income or income account, a sub-account of the current account, is usually presented under the headings income payments as outflows, and income receipts as inflows. Income refers not only to the money received from investments made abroad (note: investments are recorded in the capital account but income from investments is recorded in the current account) but also to the money sent by individuals working abroad.  If the income account is negative, the country is paying more than it is taking in interest, dividends.  If the income account is negative, the country is paying more than it is taking in interest, dividends

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FACTORS TO BE CONSIDER CONT..... After analyzing the current account from 2000 to 2012, it is

clear that India Current Account is under very worst condition as India reported a current account deficit equivalent to 21.7 Billion USD in the first quarter of 2012 which is record low during this 12 years.

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BUSINESS CONFIDENCE

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FACTORS TO BE CONSIDER The Business Confidence Index is an indicator designed to measure The

degree of optimism on the state of the economy that business owners are expressing through their activities of investing and spending. Decreasing business confidence often implies slowing economic growth because business owners are likely to decrease their investment. The idea is that the more confident business owners and managers feel about the economy, their companies, their jobs and incomes, the more likely they are to make investments and purchases. When business confidence is measured on a scale between 0 and 100, an index level below 50 means that business owners expecting their company’s performance to be weaker in the next year outnumber those expecting stronger performance.

After analyzing the business confidence, it is clear that Business confidence was very highly volatile from Jan 2008 to Jan 2010. But after 2010 and further decline is looking and still holding in 2012 also.

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DEBT TO GDP

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FACTORS TO BE CONSIDER Government debt as a percent of GDP, also known as debt-to-

GDP ratio, is the amount of national debt a country has in percentage of its Gross Domestic Product. Basically, Government debt is the money owed by the central government to its creditors. There are two types of government debt: net and gross. Gross debt is the accumulation of outstanding government debt which may be in the form of government bonds, credit default swaps, currency swaps, special drawing rights, loans, insurance and pensions. Net debt is the difference between gross debt and the financial assets that government holds. The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and more likely the country is to default on its debt obligations.

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FACTORS TO BE CONSIDER CONT......

India’s Debt to GDP was  an all time high of 84.3000 Percent in December of 2003 but after that a decline phase was seen and Debt to GDP decreased and India recorded a Government Debt to GDP of 68.05 percent of the country's Gross Domestic Product in 2011

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FIIs IN INDIAN FINANCIAL MARKETS

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SEBI REGISTERED FIIs IN INDIA FROM 2006 TO 2012

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REGISTERED FIIs IN INDIA FROM 2006 TO TILL JUNE 2012

24*DATA HAS TAKEN FROM SEBI

OVERVIEW OF FIIs IN INDIA 2012

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  FIIs NO COUNTRIES

TOTAL NO OF FIIs IN INDIA 1751 47

*ALL DATA HAS TAKEN FROM SEBI

SR. NO COUNTRY NAME FIIs IN INDIA

1UNITED STATES OF AMERICA 578

2 UNITED KINGDOM 2173 LUXEMBOURGE 1214 MAURITIUS 1055 HONGKONG 806 SINGAPORE 747 CANADA 778 AUSTRALIA 709 IRELAND 62

10 GREAT BRITAIN 44

TOTAL   1428

FACTORS TO BE CONSIDER

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FIIs INVESTMENT IN INDIAN FINANCIAL MARKETS

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FIIs INVESTMENT IN EQUITY & DEBT FROM 2000 TO TILL JUNE 2012

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FII INVESTMENT IN CAPITAL MARKET FROM 2000 TO JUNE 2012

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FIIs INVESTMENT IN DEBT MARKET FROM 2000 TO JUNE 2012

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TOTAL INVESTMENT OF FIIs IN INDIAN FINANCIAL MARKETS (CAPITAL MARKET + DEBT MARKET )FROM 2000 TO JUNE 2012

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FACTORS TO BE CONSIDER After analyzing the FIIs Investment in Capital Market

Segment from 2000 to June 2012, It is clear that FIIs Investment was increasing on progressive basis from 2000 to 2007 but after that we saw the sharp withdrawal of Rs. -52987.4 Cr and again there was a sharp up side in investment amount Rs. +84424.2 Cr in 2009 and further up side also continued in next year Rs. +133266.3 Cr in 2010. But in 2011 there was no investment in the market and net withdrawal was Rs. -2714.20 Cr.

Now in 2012 till June FIIs Investment is Rs. +41993.40 Cr.

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FACTORS TO BE CONSIDER CONT... After analyzing the FIIs Investment in Debt Market, It is

clear that FIIs are continuously taking exposure in Debt from 2000 to till June 2012. FIIs has withdrawn only Rs. -5518.40 Cr. in 2005 between 2000 to till June 2012, means from 2000 to till June 2012 there is only year that is 2005 in which FIIs has sold in debt and the amount of sell is very little.

FIIs has bought very huge in debt segment in last two years 2010 & 2011, The amount of buying is Rs. +46408.30 Cr in 2010 & Rs. +42067 Cr. In 2011.

FIIs has also bought in debt segment Rs. +20861.80 Cr. in 2012 till June.

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FACTORS TO BE CONSIDER CONT...

Total amount of Investment in Capital Market from 2000 to till June 2012 is Rs. 450185.8 Cr.

Total amount of Investment in Debt Market from 2000 to June 2012 is Rs. 142122.9 Cr.

Total amount of Investment in Indian Financial Market from 2000 to June 2012 is Rs. 592308.7 Cr.

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CONCLUSION Inflation recorded @ 6.87% in July 2012. The Gross Domestic Product (GDP) in India expanded 5.3 percent

in the first quarter of 2012 and under pressure. It is facing downtrend from 2006 as it was 10.10%.

Government Budget deficit is still negative from last 11 years and it was -7.8% to Dec 2008 which was under very worst condition. Now it equal to -4.60 percent of the country's Gross Domestic Product in 2011 which is still negative.

India Current Account is under very worst condition as India reported a current account deficit equivalent to 21.7 Billion USD in the first quarter of 2012 which is record low from 2000 to 2012.

Business Confidence Index was growing well from 2000 to 2007 to 160 from 120 but in 2008 it declined to near 81.Now it is @ 135 still in decline phase and looking down from 2009 continuously

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CONCLUSION CONT.... India Debt to GDP is improving and declining continuously from 81.76

which was in 2005 . Now India recorded a Government Debt to GDP of 68.05 percent of the country's Gross Domestic Product in 2011.

The total number FIIs registered in India is 1754 from 47 countries in 2012 but net increase in registered number of FIIs is declining. The net increase in registered number of FIIs in 2006 – 2007 was +226 but now the net increase number is only +23 in 2011 – 2012 which is clearly showing that confidence of FIIs have to much decreased so that no new much more FIIs registered number is there.

The maximum number of registered FIIs is from USA which is 578 out of total number of registered FIIs in India

The registered number of FIIs is from top 10 countries is 1428 which is the 81% of the total registered number of FIIs and these countries are USA, United Kingdom, Luxembourg, Mauritius, HingKong, Singapore, Canada, Australia, Ireland, & Great Britain.

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CONCLUSION CONT.... The total FIIs investment in Indian Equity Segment form 2000 to

till June 2012 is Rs. 450185.80 Cr. The total FIIs investment in Indian Debt Segment from 2000 to till

June 2012 is Rs. 142122.90 Cr. The total FIIs Investment in Indian Financial Markets including

Equity Segment & Debt Segment from 2000 to till June 2012 is Rs. 592308.70 Cr.

The highest investment in Equity Segment by FIIs is Rs. 133266.30 Cr. in 2010 from 2000 to till June 2012.

The highest withdrawal amount in Equity Segment by FIIs is Rs. -52987.40 Cr. in 2008 from 2000 from till June 2012 which is also the first time withdrawal with in these 12 years only but 2nd time FIIs withdrawn Rs. -2714.20 Cr in 2011.

FIIs investment in Equity Segment is Rs. 41993.40 Cr from Jan 2012 to June 2012.

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CONCLUSION CONT.... The highest investment in Debt Segment by FIIs is Rs.

46408.30 Cr. in 2010 from 2000 to till June 2012. 2010 was the only year from 2000 to till June 2012 in which FIIs

investment was highest in both the segment Equity & Debt and the amount of investment in Equity segment was Rs. 133266.30 and in Debt segment was Rs. 46408.30 Cr.

FIIs investment in Debt Segment From 2010 to till June 2012 is at record high. In 2010 it was Rs. 46408.30 Cr., in 2011 it was @ 42067 Cr., and from Jan 2012 to June 2012 it is @ Rs. 20861.80 Cr.

FIIs have sold only Rs. -5518.40 Cr. in Debt Segment in 2005 for the first time only from 2000 to till June 2012.

FIIs have increased its investment in Debt Segment from 2010 and still increasing in 2012 also.

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BIBLIOGRAPHY

Reserve Bank of India (RBI) www.rbi.org Securities and Exchange Board of India (

SEBI) www.sebi.gov.in National Stock Exchange of India Limited

(NSEIL) www.nseindia.com TradingEconomics.com www.tradingeco

nomics.com

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