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.

Key Features

--Written by two life-long insiders who can explain India's financial markets to outsiders --Clear and comprehensive coverage of this economic powerhouse --Caters to the needs of foreign investors


Finance professionals in the securities, bond, and currency, derivatives, and commodities industry, portfolio managers, traders, investment bank analysts.

Table of Contents

CONTENTS Foreword xiii Preface xv 1. The Economy 1 1.1 Overall Growth Experience 1 1.2 Understanding India’s Post-Independence Trajectory 3 1.3 Interpreting the Growth Experience 5 1.4 Trends and Volatility in GDP Growth 21 1.5 Conclusions 30 2. The Firms 33 2.1 The CMIE Database 33 2.2 The Large Nonfinancial Firms of India 34 2.3 Role of Equity Financing 40 2.4 Regulation of Firms 43 3. Private Equity and the IPO Market 45 3.1 Private Equity Investment 46 3.2 The IPO Market 52 4. The Public Equity Market 55 4.1 Products, Venues, Market Design 55 4.2 Liquidity 64 4.3 Derivatives 68 4.4 Risk and Return 72 4.5 Role of Indian Equity in Global Portfolios 79 ix x Contents 5. Government Bonds 81 5.1 Products in the Government Debt Market 81 5.2 Markets 90 5.3 Regulation and Market Access 93 5.4 Elusive Liquidity 94 6. Corporate Bonds 95 6.1 The Products 95 6.2 Markets 106 6.3 Secondary Market Trading 108 6.4 Regulation and Next Steps Forward 109 7. Commodity Futures Markets 113 7.1 A Little History 113 7.2 Products in the Commodity Derivatives Markets 115 7.3 Markets 120 7.4 Market Outcomes 127 7.5 Regulation and Legal Framework 129 8. Real Estate 133 8.1 Price Trends in Real Estate 133 8.2 Accuracy of Prices 135 8.3 Property Development 136 8.4 Segments of the Overall Real Estate Market 138 8.5 Investors 146 8.6 Title and Transparency in Indian Real Estate 148


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© 2008
Elsevier Science
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About the editors

Ajay Shah

Ajay Shah studied at IIT, Bombay and USC, Los Angeles. He has held positions at the Centre for Monitoring Indian Economy (Bombay), Indira Gandhi Institute for Development Research (Bombay) and the Ministry of Finance. He is currently a Senior Fellow at the National Institute of Public Finance and Policy (NIPFP) in India. His research interests include policy issues on Indian economic growth, open economy macroeconomics, public finance, financial economics and pensions. In the past decade, he was extensively involved in the policy process in the reforms of the equity market and the New Pension System. His work can be accessed on the web at

Affiliations and Expertise

Senior Fellow at the National Institute of Public Finance and Policy, Bombay, India

Susan Thomas

Susan Thomas is faculty at the Indira Gandhi Institute for Development Research in Bombay. Her research has been in financial econometrics, specifically on models of the volatility of financial prices, and aspects of market microstructure in Indian financial markets. She has also worked on models for the Indian zero coupon yield curve, govt. bond index construction and probability of default for Indian firms. Her work can be accessed on the web at

Affiliations and Expertise

Assistant Professor, Indira Gandhi Institute of Development Research, Bombay, India

Michael Gorham

Michael Gorham is Industry Professor and Director of the IIT Stuart Center for Financial Markets at the Stuart School of Business in the Illinois Institute of Technology. He serves on the board of directors for two exchanges — the CBOE Futures Exchange and the National Commodity and Derivatives Exchange of India. He also serves on the Business Conduct Committees of the Chicago Mercantile Exchange and the National Futures Association and the editorial boards of the GARP Risk Review and of Futures Industry magazine.

Affiliations and Expertise

Director, IIT Stuart Center for Financial Markets, Illinois Institute of Technology, Chicago, USA; 18-year veteran of the Chicago Mercantile Exchange


"...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