With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential.
There are 23 recognized stock exchanges in India, including the Over the Counter Exchange of India (OTCEI) for small and new companies and the National Stock Exchange (NSE) which was set up as a model exchange to provide nation-wide services to investors. NSE, which in the recent past has accounted for the largest trading volumes, has a fully automated screen based system that operates in the wholesale debt market segment as well as the capital market segment.
India's market capitalization was amongst the highest among the emerging markets. Total market capitalization of the BSE as on July 31, 1997 was Rs 5,573.07 billion growing by 18 percent over a period of twelve months and as of August 2005 was over $500 billion (about Rs 22 lakh crores).
Worldwide Stock Markets
Source: ETIG
India has emerged as the world’s 15th largest equity market after it added several companies to the billion dollar club in terms of capitalization in the last three months, taking the total to 81 companies. India has become the third largest Asian market (excluding Japan and Australia) after having toppled Korea, China and Singapore that have 80, 50 and 47 firms with billion-dollar market capitalization respectively. India is also inching closer to outpacing Taiwan that has 84 such companies but lags far behind Hong Kong which has 107, the highest in Asia.As of end-March 2000, the assets under management by the Indian MF industry stood at a staggering Rs 1,13,005 crore. While income funds accounted for assets of Rs 48,004 crore, growth funds had assets of Rs 30,611 crore. Balanced funds accounted for another Rs 26,757 crore of assets as of end-March 2000. Liquid funds had Rs 1,529 crore, money market funds Rs 698 crore, gilt funds Rs 2,370 crore and ELSS with Rs 3,036 crore made up the balance.
The number of companies listed on the BSE at the end of December 1994 was 4,702. This was more than the aggregate total of companies listed in 9 emerging markets (Malaysia, S.Africa, Mexico, Taiwan, Korea, Philippines, Thailand, Brazil and Chile). The number of companies was also more than the that in developed markets of Japan, UK, Germany, France, Australia, Switzerland, Canada and Hong Kong.
There is a large presence of FIIs in the Indian capital market with over 451 FIIs and 38 foreign brokers registered with SEBI. The cumulative investment of FIIs in the Indian stock market stood at US$ 6.59 billion in July 1996 and US $12 billion in April 2000. Since January 2005, FII's have pumped in $8 billion into Indian markets, compared to $8.5 billion in entire 2004 and $6.6 billion in entire 2003. Foreign investors invested $4.02 billion in June-August 2005, which is much higher than the $3.41 billion flows India received between January and May.
The recent decision of the government of easing limits on inward portfolio investment, with an increase in the ceilling for FII and non-resident Indians from 24 percent to 30%, provides a tremendous incentive to FII investment. FIIs are also permitted to invest self owned funds in the debt market and in unlisted securities. Current list of debt funds approved by SEBI includes UBS, HSBC, Morgan Grenfell, Buchanan Capital, amongst others.
The capital markets in India are regulated by the Securities and Exchange Board of India (SEBI) under the provisions of the Securities Contracts (Regulations) Act, 1956 and Securities and Exchange Board of India Act, 1922. SEBI has issued detailed guidelines for capital issues, disclosure by public companies and investor protection.
By Saniya Mehra
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