Indian Financial Markets

An Insider's Guide to How the Markets Work


  • Ajay Shah, Senior Fellow at the National Institute of Public Finance and Policy, Bombay, India
  • Susan Thomas, Assistant Professor, Indira Gandhi Institute of Development Research, Bombay, India
  • Michael Gorham, Director, IIT Stuart Center for Financial Markets, Illinois Institute of Technology, Chicago, USA; 18-year veteran of the Chicago Mercantile Exchange

The whole world wants to invest in India. But how to do this successfully? Written by two Indian financial experts with a seasoned expert of the Chicago Mercantile Exchange, this book tells you the why and how of investing in India. It explains how India's financial markets work, discusses the amazing growth of the Indian economy, identifies growth drivers, uncovers areas of uncertainty and risk. It describes how each market works: private equity and IPOs, bonds, stocks, derivatives, commodities, real estate, currency. The authors include a discussion of capital controls in each section to address the needs of foreign investors. Learn about the the markets, the instruments, the participants, and the institutions governing trading, clearing, and settlement of transactions, as well as the legal and regulatory framework governing financial securities transactions.
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Finance professionals in the securities, bond, and currency, derivatives, and commodities industry, portfolio managers, traders, investment bank analysts.


Book information

  • Published: July 2008
  • Imprint: ELSEVIER
  • ISBN: 978-0-12-374251-3


"...tells you the how and why of investing in India and provides essential information on the markets, institutions and instruments that are integral to Indian financial services.... an invaluable guide for practitioners and students alike." - Richard G. DuFour, Executive Vice President, Chicago Board Options Exchange

Table of Contents

CONTENTSForeword xiiiPreface xv1. The Economy 11.1 Overall Growth Experience 11.2 Understanding India’s Post-Independence Trajectory 31.3 Interpreting the Growth Experience 51.4 Trends and Volatility in GDP Growth 211.5 Conclusions 302. The Firms 332.1 The CMIE Database 332.2 The Large Nonfinancial Firms of India 342.3 Role of Equity Financing 402.4 Regulation of Firms 433. Private Equity and the IPO Market 453.1 Private Equity Investment 463.2 The IPO Market 524. The Public Equity Market 554.1 Products, Venues, Market Design 554.2 Liquidity 644.3 Derivatives 684.4 Risk and Return 724.5 Role of Indian Equity in Global Portfolios 79ixx Contents5. Government Bonds 815.1 Products in the Government Debt Market 815.2 Markets 905.3 Regulation and Market Access 935.4 Elusive Liquidity 946. Corporate Bonds 956.1 The Products 956.2 Markets 1066.3 Secondary Market Trading 1086.4 Regulation and Next Steps Forward 1097. Commodity Futures Markets 1137.1 A Little History 1137.2 Products in the Commodity Derivatives Markets 1157.3 Markets 1207.4 Market Outcomes 1277.5 Regulation and Legal Framework 1298. Real Estate 1338.1 Price Trends in Real Estate 1338.2 Accuracy of Prices 1358.3 Property Development 1368.4 Segments of the Overall Real Estate Market 1388.5 Investors 1468.6 Title and Transparency in Indian Real Estate 1488.7 The Sensitive Issue of Corruption 1498.8 Conclusion 1519. The Rupee 1539.1 Market Description 1539.2 Going Under the Hood 1569.3 A de facto Pegged Exchange Rate to the US Dollar 1579.4 Difficulties of Implementing the Pegged Exchange Rate 1589.5 Four Phases in INR/USD Volatility 1609.6 Conclusion 16310. Financial Firms 16510.1 A Bird’s Eye View 16510.2 The Nature of the Financial Firm in India 166Contents xi10.3 Infrastructure 16710.4 Transaction-Oriented Firms 16910.5 Banks 17310.6 Insurance Companies 18010.7 Pensions 18110.8 Mutual Funds 18310.9 Foreign Institutional Investors 18710.10 Private Equity Funds 18810.11 The Fundamental Difficulties of Fund Management 18911. Policy Issues 19111.1 The State of Indian Finance 19111.2 Reform 19311.3 The Agenda at SEBI 20111.4 Conclusion 21212. What Can Global Financial Firms Do with India? 21312.1 Portfolio Investment 21412.2 Private Equity 21512.3 FDI 21512.4 The Mauritius Route 21612.5 India-Related Financial Businessoutside India 216Appendix A. Sources 219Appendix B. Abbreviations 221Appendix C. Interpreting Those Strange IndianNumbers 225Bibliography 227Index 231