Emerging Markets Opportunities - India
Content
EMERGING MARKETS OPPORTUNITIES - INDIA
2011 SPECIAL REPORT
EMERGING MARKETS OPPORTUNITIES l INDIA 2
INSIDE THE REPORT
3
Prologue India’s Economic Indicators
4 5 6 7 8 9 11 13 16 17 19 20
India as a preferred destination for Investments? India’s Rating India’s significance over the rest of world markets Economic growth and projections by IMF Sectoral Contribution to India’s Growth Trends in Industrial Output Foreign Investments & Performance Scenarios
Best Investment Options for 2011 Performance of Foreign Funds in India Funds Status in India Investment news Concluding Remarks
EMERGING MARKETS OPPORTUNITIES l INDIA 3
PROLOGUE
The world’s largest democracy and second most populous nation, India has seen a significant growth in its economic investment and output since the 1990s. As compared to figure, India’s economy has shown an average growth rate of more than 7% in the decade since 1997, thereby decreasing poverty by about 10 percentage points. The country’s diverse economy sees agriculture as the primary dependence, though services now accounts for more than half of India’s output and one third of its entire labor force. India had shown viable improvement in IT sector, becoming a major exporter of software services and software/IT workers. India emerged relatively untouched from the financial crisis of 2007-08 as it reported a strong GDP growth of 7.4% in the 2009-10 fiscal year, even with a poor rainy season during this period. First half GDP growth this year has been reported at 8.9 percent over the same period in the previous year. India has also attracted large amounts of foreign investment in the form of FDI as well as portfolio investments this year, due to its quick recovery from financial crisis. The recovery crisis still prevails in nations like Europe and the United States, though India along with many other emerging markets has seen an increased influx of foreign capital. Capital requirements for Indian industry remain high given the rapid expansion of the economy, which means FDI investments are easily absorbed. Portfolio investment in India this year has broken all previous records resulting in a steep rise in the equity markets. This has increased the chances of bubble formation. Between April 1, 2009, and November 8, 2010, the BSE Sensex showed sharp hike from 9,901 points to an all-time closing high of 21,004 points. That index has been hovering around the 20,000 mark ever since. The table below represents the trend of India’s major economic indicators over years
India: Selected Economic Indicators
Country
2007/08 2008/09 2009/10 (Est)
2010/11 2011/12 2012/13 (Proj) (Proj) (Proj)
Real GDP (at factor cost, % change) Wholesale Price Index (average % change) Exports (% change in current US) Imports (% change in current US) Current Account Balance (% of GDP)
9.2 4.5 26.4 32.1 -1.4 5.0 74.5
6.7 8.3 7.9 11.5 -2.5 8.8 75.1
7.4 3.4 -12.5 -7.8 -2.4 9.5 77.1
8.5 8.0 20.4 18.3 -2.4 8.5 74.1
9.0 6.0 17.4 15.3 -2.3 7.4 71.3
8.5 5.0 17.0 14.4 -2.1 6.6 69.2
Sources: Central Statistical Organization, Reserve Bank of India and World Bank Staff Estimates.
General Government Deficit (% of GDP) General Government Debt (% of GDP)
EMERGING MARKETS OPPORTUNITIES l INDIA 4
INDIA AS A PREFERRED DESTINATION FOR INVESTMENTS
India is expected to achieve 9 percent economic growth in the current financial year, driven by strong performance by the agriculture and industria sectors. The economy grew by 8.9 per cent in the second quarter of the FY2010. India has emerged as one of the world’s top ten countries in industrial production. The nation’s industrial production grew at the fastest, India is the world’s largest recipient of overseas remittances. The remittances grew from $49.6 billion in 2009 to $55 billion in 2010. It is also the country with the second largest number of emigrants after Mexico, according to the World Bank. India is one of the fastest growing automobile markets in the world, expanding at 35 per cent on average in the first four months of the FY2010. The Bombay Stock Exchange has been rated as the world’s best performing stock market recently. With a 13 per cent gain, Sensex is among the world’s 10 biggest markets, according to data collected by Bloomberg. The Indian economy is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). India is among the top 10 nations in terms of foreign exchange reserves. The country’s foreign exchange reserves breached the $300-billion mark for the first time since 2008 with an addition of $2.2 billion on the back of a healthy rise in foreign currency. The nation’s forex reserves currently stand at $296.40 billion. India’s services sector, backed by the IT revolution, remains the biggest contributor to the country’s GDP, with a contribution of 58.4 per cent. The industry sector contributed 24.1 per cent and the agriculture sector contributed 17.5 per cent to the GDP. The Indian IT-BPO industry is expected to exceed $70 billion in fiscal 2011. The Indian IT-BPO exports are projected to grow by 13 per cent to 15 percent while domestic IT-BPO will grow slightly more by 15 per cent to 17 per cent during fiscal 2010-11. India owns over 18,000 tonnes of above ground gold stocks worth approximately $800 billion and representing at least 11 per cent of global stock, according to estimates of World Gold Council. India ranks 11th in the world with 557.7 tonnes of gold reserves. India’s civil aviation sector will be among the top five in the world in the next five years. Indian domestic air traffic is expected to reach 160-180 million passengers per year, while international traffic will exceed 80 million. India, China and Brazil are the top three target countries for foreign direct investment until the end of 2012 with the United States, for years number one, now in fourth place, according to the UN trade and development agency UNCTAD. The Indian telecommunications industry is the world’s fastest growing telecommunications industry, 723.28 million telephone (landlines and mobile) subscribers and 687.71 million mobile phone connections as of September 30, 2010.
EMERGING MARKETS OPPORTUNITIES l INDIA 5
INDIA’S RATING
Standard & Poor’s raised India’s outlook to stable from negative on expectations that the economy’s fiscal position may recover and the economy would remain on a strong growth path. The agency also affirmed its rating on the long-term and short-term credit. Following are key economic issues for Asia’s third-largest economy. India’s wholesale price index topped expectation and came within touching distance of double digits in February. Annual wholesale price inflation accelerated to 9.89 percent in February, the highest since October 2008 and well above the Reserve Bank of India’s (RBI) endMarch projection of 8.5 percent and the 8.56 percent January reading. Fitch’s Outlook on Long-term ratings for Indian banks remains Stable in 2011, after a negative bias in 2009 following the credit crisis. The Stable Outlook reflects easing asset quality concerns, together with an improving loan loss reserves position and expectations of further infusions of common equity by the government. Moody’s Investor Service had upgraded India’s local bond rating to “Ba1”, one notch below investment grade, citing improving public finances due to recent government reforms. Moody’s also said it would consider unifying India’s local and foreign currency ratings at Baa3. Fitch Ratings raised India’s local currency rating outlook to stable from negative forecasting lower debt ratios on the back of strong economic growth and robust cash flows from telecom auctions. The agency affirmed India’s BBB-minus local and foreign currency rating and the stable outlook on its foreign currency rating.
COMPARITIVE SURVEY
NCEAR Dun and Bradstreet and RBI (Per cent)
175
65 60
125
55 50
75
45 40
25
7 8 9 0 6 7 8 9 6 7 8 9 0 7 8 9 0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 -1 ep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep S
35
NCAER HSBC-Markit
Dun&Bradstreet FICCI
RBI-BEI (Expectation Quarter)
HSBC-Market and FICCI (Per cent)
Business Conditions Survey: A Comparison
225
75 70
EMERGING MARKETS OPPORTUNITIES l INDIA 6
Reserve Bank’s Industrial Outlook Survey: Business Expecation
Index
130 125 120 115 110 105 100 95 90 85
05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 20 20 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 n ep ec 2 ar un ep ec ar un ep ec ar un ep ec ar un ep ec ar un ep ec s s s s Ju s M J M J M J M J M J s r- ul- t-D n- r- ul- t-D n- r- ul- t-D n- pr- Jul- ct-D an- pr- Jul- ct-D an- pr- Jul- ct-D A O O J O J A Ap J Oc Ja Ap J Oc Ja Ap J Oc Ja A
80
Assessment
Expectations
Threshold
INDIA’S SIGNIFICANCE OVER THE REST OF WORLD MARKETS
India to overtake US as 2nd largest economy by 2050: PwC
As per the report published by PwC, India is expected to overtake the USA and emerge as the World’s second largest economy on purchasing power parity basis by 2050. It also stated that India has the potential to surpass China as the country has a significantly younger and faster growing working age population than China. Global financial crisis has further accelerated the shift in economic power to the emerging economies.
India among the world’s top three preferred investment hubs
A Columbia University report stated that India is amongst the world’s top three preferred investment destinations, but equity caps limit the size of potential inflows. The report stated that as the main drivers of foreign investment in India were liberalization in foreign direct investment (FDI) policy and several economic sectors, a globally competitive workforce, and rapid gross domestic product (GDP) and market growth. It also stated that India is presently the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000. The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services.
India’s growth drives global economic recovery: World Bank
World Bank President Robert Zoellick has recently stated that the high level of growth in India is helping the international economy recover from the disastrous effects of recent financial turmoil. He said that when the world economies were trying to recover
EMERGING MARKETS OPPORTUNITIES l INDIA 7
from financial turmoil, India’s growth rate picked up to 7.4 percent in 2009-10 from 6.7 percent a year ago. The economy expanded by 8.9 percent in the first half of the current fiscal, making India one of the fastest growing economies in the world. As per the International Monetary Fund’s (IMF) forecasts, Indian economy is expected to record a growth rate of 8.8 percent in 2010-11.
Domestic market opportunities are growing fast in India
As per the “India Economic Update by World Bank, the country’s middle class is estimated to expand from 50 million people in 2005 to 500 million by 2025. The outlook for the next 20 years, however, makes India an attractive market to invest in, and many international consumer goods companies do so. For now many of them contend themselves with sales outlets rather than production bases, because economies of scale allow them to do produce cheaper elsewhere. This is changing, however, in particular when production costs in East Asia are rising with rising wages.
ECONOMIC GROWTH PROJECTIONS BY IMF
Country 2007 2008 2009 2010 2011
World Output (at Market Exchange Rates) Advanced Economies Emerging & Develping Economies U.S.A. Eurozone Germany France Italy Spain Netherlands Japan U.K. Canada Austrailia Korea, South Taiwan Singapore Note : Asean 5 are Indonesia, Thailand, Philippines, Malaysia and Vietnam Source: Update to World Economic Outlook, IMF, July 2010 and WEO April 2010 Database China India Asean 5 Brazil Russia South Africa
3.9 2.8 8.3 2.1 2.8 2.5 2.3 1.5 3.6 3.6 2.4 2.6 2.5 4.7 5.1 6.0 8.2 13.0 9.4 6.2 6.1 8.1 5.5
1.8 0.5 6.1 0.4 0.6 1.2 0.3 -1.3 0.9 2.0 -1.2 0.5 0.4 2.4 5.1 6.0 8.2 9.6 7.3 4.7 5.1 5.6 3.7
-2.0 -3.2 2.4 -2.4 -4.1 -5.0 -2.2 -5.0 -3.6 -4.0 -5.2 -4.9 -2.6 1.3 0.2 -1.9 -2.0 8.7 5.7 1.7 -0.2 -6.6 -1.8
3.6 2.6 6.8 3.3 1.0 1.4 1.4 0.9 -0.4 1.3 2.4 1.2 3.6 3.0 5.7 7.7 9.9 10.5 9.4 6.4 7.1 4.3 2.6
3.4 2.4 6.4 2.9 1.3 1.6 1.6 1.1 0.6 1.3 1.8 2.1 2.8 3.5 5.0 4.3 4.9 9.6 8.4 5.5 4.2 4.1 3.6
EMERGING MARKETS OPPORTUNITIES l INDIA 8
SECTORAL CONTRIBUTION TO INDIA’S GROWTH
The sectors contributing to the India’s GDP is big in numbers and includes food processing, transportation equipment, petroleum, textiles, software, agriculture, mining, machinery, chemicals, steel, cement and many others. Agriculture is the major occupation in India, employing more than 50 percent of the population while service sector employs more than 25 percent and the industrial sector accounts more than 10 percent.
AGRICULTURAL SECTOR
Indian agricultural yields lag the highest yields found elsewhere in the world. Outlook- The better rainfall this year has lead to far higher agricultural growth. The Central Statistical Organisation (CSO) has reported that India’s farm sector grew by 2.5% and 4.4% in the first two quarters of this year and with the good rainy season this year and the expectation of good rains next year too, the outlook for Indian agriculture in 2011 is good. According to the monsoon forecasts by the Meteorological Department, crop output is expected to show a strong rebound in 2010/11.
Ex
INDUSTRIAL SECTOR
The General Index of Industrial Production (IIP) has posted double digit growth rate driven by similar growth rates in output in the manufacturing and mining sector. Manufacturing output growth in 2009/10 was strong in all the quarters, especially in the case of capital goods and durable consumer goods while growth in non-durable consumer goods were impacted by poor export growth and a lower output of sugar. Outlook- Industrial performance in India in 2011 will be influenced more by external factors than the domestic circumstances. Domestic consumption and economic recovery in Europe and North America will play a huge part in industrial growth in India. Industrial growth in 2011 is forecasted to be between 6-7 percent with significant downside risks. Overall, GDP in the industrial sector is forecasted to expand 9.6 per cent in 2010/11, rising to 10.3 per cent in 2011/12.
Ex
CONSTRUCTION SECTOR
Services sector grew to 57 percent of GDP by 2009-10. The services industry in India is well diversified due to which overall growth in the sector has been resilient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as exposed to the financial instruments or the loose lending that many western banks were involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. The expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expected to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12.
EMERGING MARKETS OPPORTUNITIES l INDIA 9
SERVICE SECTOR
Services sector grew to 57 percent of GDP by 2009-10. The services industry in India is well diversified due to which overall growth in the sector has been resilient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as exposed to the financial instruments or the loose lending that many western banks were involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. The expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expected to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12.
INDIA: RISK ASSESSMENT
RISK TYPE JANUARY 2011
Sovereign risk Currency risk Banking sector risk Source : India: Country risk summary Political risk Economic structure risk
BB BB BB BBB BBB
FISCAL DEFICIT TRENDS (IN % OF GDP)
12% 10% 8% 6% 4% 2% 0%
Source : Ministry of Finance
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
States’ Fiscal Deficit Off - Budget Liablities Centre’s Fiscal Deficit
EMERGING MARKETS OPPORTUNITIES l INDIA 10
TRENDS IN INDUSTRIAL OUTPUT (UNIT: PERCENT)
Sectoral Classification General Manufacture Electricity Mining Basic goods Capital goods Use Based Classification InterConsumer mediate goods goods Total 2007/08 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007/08 2008/09 2009/10 2010/11 Durables Non-Durables
10.3 8.7 8.3 6.7 5.3 4.7 0.8 0.8 3.8 9.0 13.4 15.1 8.5 2.8 10.1 9.8
11.1 8.9 8.9 7.3 5.8 4.9 0.5 0.3 3.4 9.2 14.6 16.0 9.0 2.8 10.5 10.1
8.3 7.1 4.6 5.5 2.0 3.2 2.9 3.0 6.0 7.4 3.8 6.7 6.4 2.8 5.8 7.5
2.7 7.4 5.5 5.2 4.0 3.8 2.0 0.9 6.8 9.0 10.3 12.7 5.2 2.6 9.7 8.0
9.4 9.3 5.0 4.7
2008/09
19.1 21.3 20.8 12.2 7.9 13.2 3.8 5.0 2.0 8.6 21.6 41.1 18.0 7.3 20.0 28.0
9.3 10.5 8.9 7.1 2.6 -1.7 -5.8 -3.2 7.4 11.7 19.3 17.1 8.9 -2.1 13.5 6.3
9.0 2.2 6.2 6.8 8.6 6.6 3.3 1.2 -0.5 10.1 12.5 7.5 6.1 4.7 7.3 8.5
-0.7 -5.5 2.1 0.1 3.5 10.8 -1.8 5.6 15.6 23.7 33.7 31.5 -1.0 4.5 25.1 16.5
12.4 5.1 7.6 8.9 10.1 5.1 4.9 -0.1 -5.3 5.1 6.0 0.2 8.5 4.8 1.6 5.3
3.1 4.7 2.4 0.4
2009/10
6.3 5.9 6.1 10.1 7.0 2.6 7.3 5.7
Source : EAC, Gov of India
AVERAGE SECTORAL CONTRIBUTIONS TO ECONOMY (%CHANGE)
Agriculture, hunting, forestry, fisheries Manufacturing
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
-1 0 1 2 3 4 5 6
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
87 -1 0 1 2 3 4 5 6 87
EMERGING MARKETS OPPORTUNITIES l INDIA 11
Mining, quarrying and utilities
Services
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
-1 0 1 2 3 4 5 6
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
87 -1 0 1 2 3 4 5 6 87
Source : World Bank; Period 1995-2010
FOREIGN INVESTMENTS & PERFORMANCE SCENARIOS
Top ten sectors attracting FDI Inflows (US$/mln)
50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0
10446 26197 25411 23221 17842 13925 12513 45668 41938 39455
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FDI
India, which was a minor global FDI player in 2000, is presently the world’s thirteenth largest FDI host country. Presently services sector accounts for approximately 61% of India’s annual FDI inflows and manufacturing accounts for 27%, while primary sector activities (primarily mining and petroleum) accounts for 9% approximately. Eighty percent of post-2000 FDI inflows have been in the form of Greenfield investments. The average investment size also quadrupled from US$ 9 million to US$ 34 million over this period.
EMERGING MARKETS OPPORTUNITIES l INDIA 12
Sectors attracting FDI inflows (% Share)
4% 4% 6% 30% 3%
While the largest recent greenfield investments span various sectors, the largest recent M&As focus on telecommunications, energy and pharmaceutics/healthcare sector. In 2010/11 and 2011/12 analysts forecast a continued expansion of net FDI to $30 billion in both years, portfolio capital inflows of $25 billion and $35 billion and a steady increase in net loan capital inflows to $17 and $25 billion respectively. Overall, our estimates for capital inflows are $73 billion in 2010/11 and $91 billion in 2011/12. This would be adequate to finance the large current account deficit in the two years and leave a modest $31 and $41 billion (2.0 and 2.4 per cent of GDP) to be absorbed in the foreign exchange reserves.
7%
10% 12% 12% 12%
Offshore opportunity
Despite India accounting for 51 per cent market share of the off shoring market, there is still tremendous space for growth as current off shoring market is still a small part of the outsourcing industry. Indian companies are expected to focus on mainland Europe to tap growth opportunities in the offshore technology services market worth tens of billions of dollars. According to Gartner Research, the country’s technology services, dominated by IT services exports worth USD 60 billion will touch USD 3.6 trillion in 2011.
Service Sector Computer Software & Hardware Telecommunications Housing & Real Estate Construction Activities Power Automobile Industry Metallurgical Industries Petroleum & Natural Gas Chemicals
60000
52398
50000
40000
30000
20000
11557
10000
9204 6269 5289 4631 4498 2903 1870 1828
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Exports
India’s exports showed an extraordinary annual growth of 36.4% which was highest in 33 -month with consignments in December 2010 raising prospects of the country exporting $215-225 billion worth of merchandise in the current fiscal. IndiExports in December aggregated $22.5 billion, while imports contracted by 11.1% to $25.1 billion, resulting in a narrow trade deficit of $2.6 billion, the lowest in three-year.
EMERGING MARKETS OPPORTUNITIES l INDIA 13
Countries attracting FDI inflows (% Share)
4% 5% 5% 3% 2% 2%
In 2010/11, analysts forecast the value of crude oil imports to be high due to increase in crude prices by almost 15 per cent and an increase in the quantities imported. The oil import bill is expected to rise to $103 billion in 2010/11 and to $120 billion in 2011/12. Amongst the non oil imports, a comparatively slower growth is expected in the case of gold, silver imports and a stronger growth in the remaining segments.
6%
52%
9%
12%
The overall merchandise imports on balance-of-payments basis are expected to rise to nearly $354 billion (up 18 per cent) in 2010/11 and $414 billion (up 17 per cent) in 2011/12. On the export side, petroleum products would be slightly higher than that of imports at 24 and 16 per cent in 2010/11 and 2011/12 respectively.
Mauritius Singapore USA UK Netherlands
Japan Cyprus Germany France UAE
100 80 60
Growth (in per cent)
40 20 0 -20 -40
Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10
Exports Imports
-60
BEST INVESTMENT OPTIONS FOR 2011
The Indian Securities market remained stable during 2009-10, as the global markets too witnessed improved stability with an indication of prospects of firm recovery. However, fiscal concerns remain strong as sovereign risks continue to be a cause of concern in some European countries.
Primary Securities Market and Secondary Securities Market
Indian primary market witnessed renewed activity in terms of resource mobilisation and number of issues during 2009-10, building it further from its relatively subdued pace in 2008-09. In view of the recovery witnessed in equity markets post global financial crisis, companies entered the primary market and investors’ response to public issues was encouraging in 2009-10 when compared to 2008-09. Secondary market also witnessed revival following sharp fall in the previous year in the wake of global financial crisis that had plunged global equity markets. Investors
EMERGING MARKETS OPPORTUNITIES l INDIA 14
24000 19000 14000
20000 18000 16000 14000 12000 10000 Aug-10 Dec-09 Feb-10 Jun-09 Jun-10 Aur-09 Apr-09 Apr-10 Oct-09 8000
Rs crore
9000 4000 -1000 -6000 -11000
FII Investment Mutual Fund Investment
Average BSE Sensex (RHS)
regained confidence and the Indian market rallied post announcement of general election results during May 2009.
Equity Growth
During 2009-10, all the equity markets witnessed uptrend, however, in different magnitude. The Indian benchmark indices namely BSE Sensex and S&P CNX Nifty gave year on year return of 80.5 percent and 73.8 percent respectively in 2009-10. The BSE Small-cap index recorded an increase of 161.7 percent in 2009-10. Among the sectoral indices, highest increase was recorded by BSE Metal index (210.2 percent), BSE Consumer Durables (159.7 percent) and BSE Auto index (150.6 percent). While the metal index reflected the strengthening of metal prices, the general upward trend in the economy and industrial production got reflected in increase in the capital goods and auto indices. The equity market has entered territory that it occupied exactly two years ago and in similar fashion the level of the stock market (the Bombay Sensitive Index or SENSEX) is close to 21,000. Relative valuations are on the richer side and hence analysts expect moderation in index returns for 2011 (in the 10- 15 percent zone from current levels).
Investments in Mutual Funds
Mutual funds after witnessing redemption pressures during later half of 2008-09 post global credit crisis witnessed renewal of investors’ interest in terms of mobilization of resources through new fund offerings as well as existing schemes. The gross mobilisation of resources by all mutual funds during 2009-10 was at Rs.100190 billion compared to Rs.54263 billion during the previous year indicating an increase of 84.7 percent over the previous year. Redemption also rose by 82.2 percent to Rs.99359 billion in 2009-10 from Rs.54546 billion in 2008-09. All mutual funds, put together, recorded a net inflow of Rs.830 billion in 2009-10 as compared to an outflow of Rs.282 billion in 2008-09. The assets under management by all mutual funds increased by 47.2 percent to Rs.6139 billion at the end of March 2010 from Rs.4173 billion at the end of March 2009.
EMERGING MARKETS OPPORTUNITIES l INDIA 15
PE and Venture Capital Investments
The year 2011 is likely to witness maximum number of private equity/venture capital exits in the history of Indian PE industry. The typical cycle of investment-exit is expected to get completed in 2010-11 for many PE investors in India. Private equity firms exited a record 121 companies in India during 2010, while investments almost doubled to $7.97bn from the 2009 figure. Venture capital and private equity investments in India had witnessed a phenomenal growth both in terms of amount invested (from $1.8 billion in 2004 to $22 billion in 2007 before tapering off to $8.1 billion in 2008) as well as the number of deals (from 80 in 2004 to 481 in 2007 and then slowing down to 297 in 2008). There were huge PE investments in technology-led, capital intensive sectors like Telecom, Power and Infrastructure in addition to those sectors that were traditionally preferred by VCPE investors like IT & ITES, Healthcare, etc. Private Equity firms invested $7,974 million over 325 deals in India during the 12 months ending December 2010, compared to $4,068 million across 290 deals during the previous year, according to analysis by Venture Intelligence, a research service focused on Private Equity and M&A activity. (These figures include VC investments and exclude PE investments in Real Estate). With 34 investments worth about $2,141 million, Energy companies topped in terms of investment value during 2010, while Information Technology and IT-Enabled Services (IT & ITES) with 79 investments worth $696 million topped in terms of volume. BFSI with 44 investments worth $1,054 million came second on both parameters.
IPOs in 2010
Indian IPO market has witnessed a strong comeback in 2010 after sluggish performance in 2009 as most of the companies rushed to capital markets to raise funds on encouraging stock markets. Jubilant FoodWorks, Thangamayil Jeweller, Talwalkars Better Value Fitness emerged as top 3 performers in 2010. Meanwhile, Coal India and MOIL were most successful IPOs which received overwhelming response from investor community. IPO 2011 Scenario – India IPO 2011 outlook seems bright with at least 100 public issues in the pipeline, with an indicative size of around Rs 400billion. If the government maintains its Rs 400 billion target for the next fiscal too, total may be Rs 900 billion, up 27% from 2010. Thirty five prospectuses have already got the SEBI’s clearance, while the remaining sixty five are awaiting nod. The country also celebrated its biggest IPO ever this year with the world’s largest coal producer Coal India, collecting $3.5 billion in October. Big private companies, like Jindal Power and Sterlite Energy which are planning an initial public offering in 2011, may have to lower valuation expectations as investors turn choosy, after profiting from state-owned companies’ issues that were priced attractively. IPO outlook for the year 2011 will see a massive bunch of issues hit the market unlike before and the issuers will have to price their trade more sensibly to attract investor attention.
Corporate Bond Market
The number of trades in corporate bonds during 2009- 10 rose by 68.5 percent in comparison to 2008-09. In comparison to increase in number oftrades, increase in the volume of trades during 2009-10 is very significant. This increase is mainly attributed to increase in volume of trades reportedat FIMMDA by 218.5 percent followed by NSE at 206.9 percent and BSE at 42.9 percent.
EMERGING MARKETS OPPORTUNITIES l INDIA 16
PERFORMANCE OF FOREIGN FUNDS IN INDIA
Fund Name AIG India Equity Fund - Reg - Growth Benchmark Derivative Fund - Growth Benchmark Equity And Derivative Opportunities Fund - Growth Benchmark S&P CNX 500 Fund - Growth BNP Paribas China-India Fund - Growth BNP Paribas Dividend Yield Fund - Growth BNP Paribas Equity Fund - Growth BNP Paribas Mid Cap Fund - Growth BNP Paribas Opportunities Fund - Growth BNP Paribas Sustainable Development Fund - Growth Fidelity Equity Fund - Growth Fidelity India Growth Fund - Growth Fidelity India Special Situations Fund - Growth Fidelity India Value Fund - Growth Fidelity International Opportunities Fund - Growth Franklin Asian Equity Fund -Growth Franklin India Bluechip - Growth Franklin India Flexi Cap Fund - Growth Franklin India High Growth Companies Fund - Growth Franklin India Index Fund - BSE Sensex Plan - Growth Franklin India Index Fund - NSE Nifty Plan - Growth Franklin India Opportunity Fund - Growth Franklin India Prima Fund - Growth Franklin India Prima Plus - Growth Franklin India Smaller Companies Fund - Growth HSBC Dynamic Fund - Growth HSBC Equity Fund - Growth HSBC India Opportunities Fund - Growth HSBC Midcap Equity Fund - Growth HSBC Progressive Themes Fund - Growth HSBC Unique Opportunities Fund - Growth ING C.U.B. Fund - Growth ING Contra Fund - Growth ING Core Equity Fund - Growth ING Dividend Yield Fund - Growth ING Domestic Opportunities Fund - Growth ING Midcap Fund - Growth ING Nifty Plus Fund - Growth ING OptiMix Multi Manager Equity Fund - Plan A - Growth JPMorgan India Equity Fund - Growth Performance 1 Mth % 3 Mths % 6 Mths % 1 Yr % 3 Yrs %
-9.69 0.54 0.69 -10.92 -7.41 -9.16 -10.4 -13.59 -11.23 -11.46 -9.11 -9.33 -9.21 -9.92 -6.46 1.36 -8.53 -8.92 -11.22 -10.31 -10.26 -9.99 -12.9 -8.16 -11.24 -8.48 -8.7 -9.4 -15.4 -14.38 -9.79 -10.91 -10.71 -8.67 -8.68 -10.43 -10.28 -10 -12.14 -10.8
-11.01 1.7 2.06 -13.23 -10.59 -13.04 -10.08 -18.49 -15.68 -14.88 -10.65 -10.26 -12.22 -14.27 -6.72 3.1 -7.89 -11.62 -16.62 -9.95 -10.39 -13.03 -17.71 -9.72 -16.73 -9.91 -10.29 -11.33 -22.98 -22.71 -13.25 -16.16 -13.9 -10.59 -12.5 -15.36 -15.54 -10.12 -15.46 -12.27
-3.93 3.25 3.76 -2.75 -1.39 -1.82 1.69 -8.15 -6.05 -4.45 0.01 0.48 -1.27 -3 3.23 9.89 2.5 1.13 -3.89 1.84 1.33 -1.48 -6.76 0.77 -5.71 3.05 1.66 0.67 -9.91 -12.5 2.89 -6.04 -5.8 2.24 -0.96 -5.34 -7.4 1.36 -7.37 -0.38
3.24 4.75 5.46 5 9.14 14.49 11.15 9.65 4.61 5.65 18.34 18.01 13.18 10.59 17.8 17.26 14.86 14.19 4.87 12.23 12.11 9.2 6.05 11.66 6.45 11.39 13.6 10.92 -2.36 -5.39 13.25 7.41 2.66 14.54 17.33 6.88 7.46 11.87 3.71 16.57
-0.11 N/A 5.52 N/A -0.96 7.93 -3.49 -10.27 -14.5 -1.76 7.26 7.61 3.65 N/A 7.39 6.95 7.29 5.6 0.36 0.56 1.09 -2.62 0.78 4.51 -0.74 -3.13 0.17 -2.67 -5.92 -11.95 -5.61 -3.28 2.85 0.27 13.67 -1.66 -2.04 1.22 -7.51 -0.18
EMERGING MARKETS OPPORTUNITIES l INDIA 17
JPMorgan India Smaller Companies Fund - Growth Morgan Stanley A.C.E Fund - Growth Morgan Stanley Growth Fund - Growth Pramerica Equity Fund - Growth PRINCIPAL Dividend Yield Fund - Growth Principal Emerging Bluechip Fund - Growth PRINCIPAL Growth Fund - Growth PRINCIPAL Index Fund - Growth Templeton India Equity Income Fund - Growth Templeton India Growth Fund - Growth
-12.92 -11.2 -11.74 -10.24 -10.22 -13.69 -11.41 -10.29 -5.56 -9.87
-16.98 -13.8 -14.64 N/A -14.89 -17.82 -13.79 -10.47 -4.73 -11.89
-7.05 -3.17 -1.86 N/A -1.39 -7.6 -4.31 1.24 10.21 0.86
12.18 10.69 10.35 N/A 14.21 4.96 4.28 11.76 21.33 12.23
-5.91 N/A -0.19 N/A 4.81 N/A -8.12 0.04 10.68 9.19
Note: Performances till date
FUNDS STATUS IN INDIA
Fund Name
No. of Schemes*
Asset Under Management As on
Billion Rupees Corpus As on Corpus Net inc/dec in corpus
AIG Global Investment Group Mutual Fund Axis Mutual Fund Baroda Pioneer Mutual Fund Benchmark Mutual Fund Bharti AXA Mutual Fund Birla Sun Life Mutual Fund BNP Paribas Mutual Fund Canara Robeco Mutual Fund Daiwa Mutual Fund Deutsche Mutual Fund DSP Blackrock Mutual Fund Edelweiss Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ICICI Prudential Mutual Fund IDBI Mutual Fund IDFC Mutual Fund ING Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund
45 39 33 18 45 238 119 90 11 133 126 39 30 79 163 201 83 379 12 201 85 88 37 152
31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10
8.83 50.13 29.61 29.35 4.12 576.89 50.21 73.92 1.35 62.85 276.68 2.14 2.03 89.01 394.4 878.83 47.29 658.41 20.52 173.48 13.86 64.54 51.96 265.89
30-Sep-10 30-Sep-10 31-Oct-10 30-Nov-10 30-Sep-10 31-Oct-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10
10.20 46.36 41.39 29.90 5.11 613.55 49.65 77.19 3.19 65.21 266.74 2.15 1.98 85.36 421.42 931.06 48.10 697.28 22.00 183.98 14.68 63.30 84.48 284.30
-1.37 3.77 -11.78 -0.55 -0.99 -36.66 0.56 -3.26 -1.84 -2.36 9.94 -0.01 0.05 3.65 -27.00 -52.22 -0.81 -38.87 -1.48 -10.51 -0.82 1.24 -32.52 -18.41
EMERGING MARKETS OPPORTUNITIES l INDIA 18
L&T Mutual Fund LIC Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund Motilal Oswal Mutual Fund Peerless Mutual Fund Pramerica Mutual Fund PRINCIPAL Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Religare Mutual Fund Sahara Mutual Fund SBI Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund
81 62 33 12 2 24 14 72 11 242 110 44 155 175 183 56 227
31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10
31.93 186.95 3.28 23.61 3.01 23.06 11.09 57.64 1.17 1020.66 104.11 3.16 414.98 145.29 208.55 25.33 653.87
30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10
35.43 197.27 2.75 23.51 3.05 20.94 6.30 56.42 1.19 1077.49 107.80 7.56 421.00 142.41 219.64 23.68 676.18
-3.50 -10.32 0.53 0.10 -0.04 2.11 4.78 1.22 -0.03 -56.82 -3.69 -4.40 -6.03 2.88 -11.09 1.65 -22.30
EMERGING MARKETS OPPORTUNITIES l INDIA 19
INVESTMENT NEWS Global investors buy stocks at record high on rising outlook
The Securities and Exchange Board of India, nation’s market regulator stated recently that the Global funds purchased a net 2.24 billion rupees ($49.2 million) of Indian equities on Feb. 4. It stated that foreigners bought 25.8 billion rupees of shares, while they sold 23.5 billion rupees. Overall in 2010, the global investors bought a record 1.33 trillion rupees of shares, raising the benchmark index 17 percent and making it the best performer among the world’s 10 biggest equity markets. They invested 464 billion rupees in bonds last year.
Indian stocks a clear buy: Goldman
Goldman Sachs Asset Management’s chief investment officer for India, Prashant Khemka had stated recently that Indian stocks remains on top pref-erence for buy for the next few years because inflation fears and concerns about overvaluation are unjustified. Khemka believes that Indian compa-nies’ earnings could post annual growth of up to 20 percent over the next three to four years. He said that sluggish growth in the U.S. or Europe is good for India rather than a concern for two reasons: first, exports as a percentage of the economy is much smaller for India compared with most countries; second, it helps to keep in check commodity prices, mainly crude oil.” He further stated that Indian IT sector also benefited from low capi-tal expenditure and high returns, making it an attractive investment opportunity.
Indian Bonds see steady returns
Indian bonds seem an attractive buy for International investors to lock in the highest yields since 2008, with the rupee forecasted to generate the world’s biggest returns after the Turkish lira. According to the Bloomberg data the rupee is expected to generate a return of 13% including interest-rate income this year, more than four times the 3% gain predicted for China’s yuan. Overseas investments in Indian bonds reached an all-time high of $20.3 billion in January as 10-year yields jumped 0.24 percentage point, the first monthly increase since October.
HSBC plans to enter Indian equities
Garry Evans the Global Head of Strategy at HSBC said that the Emerging Markets are fundamentally under owned by global investors. He also stated that HSBC may enter Indian equities in the next one or two quarters. “It is getting at a more attractive price level and the fundamental story still re-mains very attractive for Indian equities”, he says.
Morgan Stanley plans investments in India infrastructure firm
Morgan Stanley’s Global Infrastructure Fund plans investment $200 million for an equity stake in the Indian arm of privately held Spanish construc-tion firm Isolux Corsan, the Economic Times newspaper stated. The paper stated that funds worth $4 billion fund, which was raised in May 2008, will invest in Isolux which builds roads in north India.
EMERGING MARKETS OPPORTUNITIES l INDIA 20
Investors prefer Indian stocks, a lucrative bargain
Betting on emerging markets could yield lucrative bargains and be safer than standing pat in the United States and risking a double dip, hedge fund managers said. Investors are now looking for “undiscovered” companies so as to make more money rather relying on market which are termed more efficient.
CONCLUDING REMARKS
The overall performance of the Indian economy in 2009/10 was beyond expectations. The farm sector which was forecasted to contract showed resilience, growing by 0.2 percent despite the weak South West monsoon. The non- farm sector also followed the same line with strong performance. It is estimated that the Indian economy would grow at 8.5 percent in 2010/11 and 9.0 percent in 2011/12. In the current fiscal year, agriculture will grow at 4.5 percent, industry at 9.7 percent and services at 8.9 per cent. The beginning of the new decade heralds the slow, but steady end of the worst recession in the past 60 years. Global GDP, after declining by 1.1 per cent in 2009, is predicted to increase by 3.1 per cent in 2010, and 4.2 per cent in 2011, with developing economies growing thrice as fast as the developed economies.
Disclaimer - All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. This is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment. This document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance.
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2011 SPECIAL REPORT
EMERGING MARKETS OPPORTUNITIES l INDIA 2
INSIDE THE REPORT
3
Prologue India’s Economic Indicators
4 5 6 7 8 9 11 13 16 17 19 20
India as a preferred destination for Investments? India’s Rating India’s significance over the rest of world markets Economic growth and projections by IMF Sectoral Contribution to India’s Growth Trends in Industrial Output Foreign Investments & Performance Scenarios
Best Investment Options for 2011 Performance of Foreign Funds in India Funds Status in India Investment news Concluding Remarks
EMERGING MARKETS OPPORTUNITIES l INDIA 3
PROLOGUE
The world’s largest democracy and second most populous nation, India has seen a significant growth in its economic investment and output since the 1990s. As compared to figure, India’s economy has shown an average growth rate of more than 7% in the decade since 1997, thereby decreasing poverty by about 10 percentage points. The country’s diverse economy sees agriculture as the primary dependence, though services now accounts for more than half of India’s output and one third of its entire labor force. India had shown viable improvement in IT sector, becoming a major exporter of software services and software/IT workers. India emerged relatively untouched from the financial crisis of 2007-08 as it reported a strong GDP growth of 7.4% in the 2009-10 fiscal year, even with a poor rainy season during this period. First half GDP growth this year has been reported at 8.9 percent over the same period in the previous year. India has also attracted large amounts of foreign investment in the form of FDI as well as portfolio investments this year, due to its quick recovery from financial crisis. The recovery crisis still prevails in nations like Europe and the United States, though India along with many other emerging markets has seen an increased influx of foreign capital. Capital requirements for Indian industry remain high given the rapid expansion of the economy, which means FDI investments are easily absorbed. Portfolio investment in India this year has broken all previous records resulting in a steep rise in the equity markets. This has increased the chances of bubble formation. Between April 1, 2009, and November 8, 2010, the BSE Sensex showed sharp hike from 9,901 points to an all-time closing high of 21,004 points. That index has been hovering around the 20,000 mark ever since. The table below represents the trend of India’s major economic indicators over years
India: Selected Economic Indicators
Country
2007/08 2008/09 2009/10 (Est)
2010/11 2011/12 2012/13 (Proj) (Proj) (Proj)
Real GDP (at factor cost, % change) Wholesale Price Index (average % change) Exports (% change in current US) Imports (% change in current US) Current Account Balance (% of GDP)
9.2 4.5 26.4 32.1 -1.4 5.0 74.5
6.7 8.3 7.9 11.5 -2.5 8.8 75.1
7.4 3.4 -12.5 -7.8 -2.4 9.5 77.1
8.5 8.0 20.4 18.3 -2.4 8.5 74.1
9.0 6.0 17.4 15.3 -2.3 7.4 71.3
8.5 5.0 17.0 14.4 -2.1 6.6 69.2
Sources: Central Statistical Organization, Reserve Bank of India and World Bank Staff Estimates.
General Government Deficit (% of GDP) General Government Debt (% of GDP)
EMERGING MARKETS OPPORTUNITIES l INDIA 4
INDIA AS A PREFERRED DESTINATION FOR INVESTMENTS
India is expected to achieve 9 percent economic growth in the current financial year, driven by strong performance by the agriculture and industria sectors. The economy grew by 8.9 per cent in the second quarter of the FY2010. India has emerged as one of the world’s top ten countries in industrial production. The nation’s industrial production grew at the fastest, India is the world’s largest recipient of overseas remittances. The remittances grew from $49.6 billion in 2009 to $55 billion in 2010. It is also the country with the second largest number of emigrants after Mexico, according to the World Bank. India is one of the fastest growing automobile markets in the world, expanding at 35 per cent on average in the first four months of the FY2010. The Bombay Stock Exchange has been rated as the world’s best performing stock market recently. With a 13 per cent gain, Sensex is among the world’s 10 biggest markets, according to data collected by Bloomberg. The Indian economy is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). India is among the top 10 nations in terms of foreign exchange reserves. The country’s foreign exchange reserves breached the $300-billion mark for the first time since 2008 with an addition of $2.2 billion on the back of a healthy rise in foreign currency. The nation’s forex reserves currently stand at $296.40 billion. India’s services sector, backed by the IT revolution, remains the biggest contributor to the country’s GDP, with a contribution of 58.4 per cent. The industry sector contributed 24.1 per cent and the agriculture sector contributed 17.5 per cent to the GDP. The Indian IT-BPO industry is expected to exceed $70 billion in fiscal 2011. The Indian IT-BPO exports are projected to grow by 13 per cent to 15 percent while domestic IT-BPO will grow slightly more by 15 per cent to 17 per cent during fiscal 2010-11. India owns over 18,000 tonnes of above ground gold stocks worth approximately $800 billion and representing at least 11 per cent of global stock, according to estimates of World Gold Council. India ranks 11th in the world with 557.7 tonnes of gold reserves. India’s civil aviation sector will be among the top five in the world in the next five years. Indian domestic air traffic is expected to reach 160-180 million passengers per year, while international traffic will exceed 80 million. India, China and Brazil are the top three target countries for foreign direct investment until the end of 2012 with the United States, for years number one, now in fourth place, according to the UN trade and development agency UNCTAD. The Indian telecommunications industry is the world’s fastest growing telecommunications industry, 723.28 million telephone (landlines and mobile) subscribers and 687.71 million mobile phone connections as of September 30, 2010.
EMERGING MARKETS OPPORTUNITIES l INDIA 5
INDIA’S RATING
Standard & Poor’s raised India’s outlook to stable from negative on expectations that the economy’s fiscal position may recover and the economy would remain on a strong growth path. The agency also affirmed its rating on the long-term and short-term credit. Following are key economic issues for Asia’s third-largest economy. India’s wholesale price index topped expectation and came within touching distance of double digits in February. Annual wholesale price inflation accelerated to 9.89 percent in February, the highest since October 2008 and well above the Reserve Bank of India’s (RBI) endMarch projection of 8.5 percent and the 8.56 percent January reading. Fitch’s Outlook on Long-term ratings for Indian banks remains Stable in 2011, after a negative bias in 2009 following the credit crisis. The Stable Outlook reflects easing asset quality concerns, together with an improving loan loss reserves position and expectations of further infusions of common equity by the government. Moody’s Investor Service had upgraded India’s local bond rating to “Ba1”, one notch below investment grade, citing improving public finances due to recent government reforms. Moody’s also said it would consider unifying India’s local and foreign currency ratings at Baa3. Fitch Ratings raised India’s local currency rating outlook to stable from negative forecasting lower debt ratios on the back of strong economic growth and robust cash flows from telecom auctions. The agency affirmed India’s BBB-minus local and foreign currency rating and the stable outlook on its foreign currency rating.
COMPARITIVE SURVEY
NCEAR Dun and Bradstreet and RBI (Per cent)
175
65 60
125
55 50
75
45 40
25
7 8 9 0 6 7 8 9 6 7 8 9 0 7 8 9 0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 -1 ep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep S
35
NCAER HSBC-Markit
Dun&Bradstreet FICCI
RBI-BEI (Expectation Quarter)
HSBC-Market and FICCI (Per cent)
Business Conditions Survey: A Comparison
225
75 70
EMERGING MARKETS OPPORTUNITIES l INDIA 6
Reserve Bank’s Industrial Outlook Survey: Business Expecation
Index
130 125 120 115 110 105 100 95 90 85
05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 20 20 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 n ep ec 2 ar un ep ec ar un ep ec ar un ep ec ar un ep ec ar un ep ec s s s s Ju s M J M J M J M J M J s r- ul- t-D n- r- ul- t-D n- r- ul- t-D n- pr- Jul- ct-D an- pr- Jul- ct-D an- pr- Jul- ct-D A O O J O J A Ap J Oc Ja Ap J Oc Ja Ap J Oc Ja A
80
Assessment
Expectations
Threshold
INDIA’S SIGNIFICANCE OVER THE REST OF WORLD MARKETS
India to overtake US as 2nd largest economy by 2050: PwC
As per the report published by PwC, India is expected to overtake the USA and emerge as the World’s second largest economy on purchasing power parity basis by 2050. It also stated that India has the potential to surpass China as the country has a significantly younger and faster growing working age population than China. Global financial crisis has further accelerated the shift in economic power to the emerging economies.
India among the world’s top three preferred investment hubs
A Columbia University report stated that India is amongst the world’s top three preferred investment destinations, but equity caps limit the size of potential inflows. The report stated that as the main drivers of foreign investment in India were liberalization in foreign direct investment (FDI) policy and several economic sectors, a globally competitive workforce, and rapid gross domestic product (GDP) and market growth. It also stated that India is presently the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000. The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services.
India’s growth drives global economic recovery: World Bank
World Bank President Robert Zoellick has recently stated that the high level of growth in India is helping the international economy recover from the disastrous effects of recent financial turmoil. He said that when the world economies were trying to recover
EMERGING MARKETS OPPORTUNITIES l INDIA 7
from financial turmoil, India’s growth rate picked up to 7.4 percent in 2009-10 from 6.7 percent a year ago. The economy expanded by 8.9 percent in the first half of the current fiscal, making India one of the fastest growing economies in the world. As per the International Monetary Fund’s (IMF) forecasts, Indian economy is expected to record a growth rate of 8.8 percent in 2010-11.
Domestic market opportunities are growing fast in India
As per the “India Economic Update by World Bank, the country’s middle class is estimated to expand from 50 million people in 2005 to 500 million by 2025. The outlook for the next 20 years, however, makes India an attractive market to invest in, and many international consumer goods companies do so. For now many of them contend themselves with sales outlets rather than production bases, because economies of scale allow them to do produce cheaper elsewhere. This is changing, however, in particular when production costs in East Asia are rising with rising wages.
ECONOMIC GROWTH PROJECTIONS BY IMF
Country 2007 2008 2009 2010 2011
World Output (at Market Exchange Rates) Advanced Economies Emerging & Develping Economies U.S.A. Eurozone Germany France Italy Spain Netherlands Japan U.K. Canada Austrailia Korea, South Taiwan Singapore Note : Asean 5 are Indonesia, Thailand, Philippines, Malaysia and Vietnam Source: Update to World Economic Outlook, IMF, July 2010 and WEO April 2010 Database China India Asean 5 Brazil Russia South Africa
3.9 2.8 8.3 2.1 2.8 2.5 2.3 1.5 3.6 3.6 2.4 2.6 2.5 4.7 5.1 6.0 8.2 13.0 9.4 6.2 6.1 8.1 5.5
1.8 0.5 6.1 0.4 0.6 1.2 0.3 -1.3 0.9 2.0 -1.2 0.5 0.4 2.4 5.1 6.0 8.2 9.6 7.3 4.7 5.1 5.6 3.7
-2.0 -3.2 2.4 -2.4 -4.1 -5.0 -2.2 -5.0 -3.6 -4.0 -5.2 -4.9 -2.6 1.3 0.2 -1.9 -2.0 8.7 5.7 1.7 -0.2 -6.6 -1.8
3.6 2.6 6.8 3.3 1.0 1.4 1.4 0.9 -0.4 1.3 2.4 1.2 3.6 3.0 5.7 7.7 9.9 10.5 9.4 6.4 7.1 4.3 2.6
3.4 2.4 6.4 2.9 1.3 1.6 1.6 1.1 0.6 1.3 1.8 2.1 2.8 3.5 5.0 4.3 4.9 9.6 8.4 5.5 4.2 4.1 3.6
EMERGING MARKETS OPPORTUNITIES l INDIA 8
SECTORAL CONTRIBUTION TO INDIA’S GROWTH
The sectors contributing to the India’s GDP is big in numbers and includes food processing, transportation equipment, petroleum, textiles, software, agriculture, mining, machinery, chemicals, steel, cement and many others. Agriculture is the major occupation in India, employing more than 50 percent of the population while service sector employs more than 25 percent and the industrial sector accounts more than 10 percent.
AGRICULTURAL SECTOR
Indian agricultural yields lag the highest yields found elsewhere in the world. Outlook- The better rainfall this year has lead to far higher agricultural growth. The Central Statistical Organisation (CSO) has reported that India’s farm sector grew by 2.5% and 4.4% in the first two quarters of this year and with the good rainy season this year and the expectation of good rains next year too, the outlook for Indian agriculture in 2011 is good. According to the monsoon forecasts by the Meteorological Department, crop output is expected to show a strong rebound in 2010/11.
Ex
INDUSTRIAL SECTOR
The General Index of Industrial Production (IIP) has posted double digit growth rate driven by similar growth rates in output in the manufacturing and mining sector. Manufacturing output growth in 2009/10 was strong in all the quarters, especially in the case of capital goods and durable consumer goods while growth in non-durable consumer goods were impacted by poor export growth and a lower output of sugar. Outlook- Industrial performance in India in 2011 will be influenced more by external factors than the domestic circumstances. Domestic consumption and economic recovery in Europe and North America will play a huge part in industrial growth in India. Industrial growth in 2011 is forecasted to be between 6-7 percent with significant downside risks. Overall, GDP in the industrial sector is forecasted to expand 9.6 per cent in 2010/11, rising to 10.3 per cent in 2011/12.
Ex
CONSTRUCTION SECTOR
Services sector grew to 57 percent of GDP by 2009-10. The services industry in India is well diversified due to which overall growth in the sector has been resilient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as exposed to the financial instruments or the loose lending that many western banks were involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. The expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expected to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12.
EMERGING MARKETS OPPORTUNITIES l INDIA 9
SERVICE SECTOR
Services sector grew to 57 percent of GDP by 2009-10. The services industry in India is well diversified due to which overall growth in the sector has been resilient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as exposed to the financial instruments or the loose lending that many western banks were involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. The expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expected to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12.
INDIA: RISK ASSESSMENT
RISK TYPE JANUARY 2011
Sovereign risk Currency risk Banking sector risk Source : India: Country risk summary Political risk Economic structure risk
BB BB BB BBB BBB
FISCAL DEFICIT TRENDS (IN % OF GDP)
12% 10% 8% 6% 4% 2% 0%
Source : Ministry of Finance
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
States’ Fiscal Deficit Off - Budget Liablities Centre’s Fiscal Deficit
EMERGING MARKETS OPPORTUNITIES l INDIA 10
TRENDS IN INDUSTRIAL OUTPUT (UNIT: PERCENT)
Sectoral Classification General Manufacture Electricity Mining Basic goods Capital goods Use Based Classification InterConsumer mediate goods goods Total 2007/08 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007/08 2008/09 2009/10 2010/11 Durables Non-Durables
10.3 8.7 8.3 6.7 5.3 4.7 0.8 0.8 3.8 9.0 13.4 15.1 8.5 2.8 10.1 9.8
11.1 8.9 8.9 7.3 5.8 4.9 0.5 0.3 3.4 9.2 14.6 16.0 9.0 2.8 10.5 10.1
8.3 7.1 4.6 5.5 2.0 3.2 2.9 3.0 6.0 7.4 3.8 6.7 6.4 2.8 5.8 7.5
2.7 7.4 5.5 5.2 4.0 3.8 2.0 0.9 6.8 9.0 10.3 12.7 5.2 2.6 9.7 8.0
9.4 9.3 5.0 4.7
2008/09
19.1 21.3 20.8 12.2 7.9 13.2 3.8 5.0 2.0 8.6 21.6 41.1 18.0 7.3 20.0 28.0
9.3 10.5 8.9 7.1 2.6 -1.7 -5.8 -3.2 7.4 11.7 19.3 17.1 8.9 -2.1 13.5 6.3
9.0 2.2 6.2 6.8 8.6 6.6 3.3 1.2 -0.5 10.1 12.5 7.5 6.1 4.7 7.3 8.5
-0.7 -5.5 2.1 0.1 3.5 10.8 -1.8 5.6 15.6 23.7 33.7 31.5 -1.0 4.5 25.1 16.5
12.4 5.1 7.6 8.9 10.1 5.1 4.9 -0.1 -5.3 5.1 6.0 0.2 8.5 4.8 1.6 5.3
3.1 4.7 2.4 0.4
2009/10
6.3 5.9 6.1 10.1 7.0 2.6 7.3 5.7
Source : EAC, Gov of India
AVERAGE SECTORAL CONTRIBUTIONS TO ECONOMY (%CHANGE)
Agriculture, hunting, forestry, fisheries Manufacturing
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
-1 0 1 2 3 4 5 6
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
87 -1 0 1 2 3 4 5 6 87
EMERGING MARKETS OPPORTUNITIES l INDIA 11
Mining, quarrying and utilities
Services
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
-1 0 1 2 3 4 5 6
Brazil China Republic of Korea Russian Federation India Mexico South America, excl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe CIS, excl. Russian Fed.
87 -1 0 1 2 3 4 5 6 87
Source : World Bank; Period 1995-2010
FOREIGN INVESTMENTS & PERFORMANCE SCENARIOS
Top ten sectors attracting FDI Inflows (US$/mln)
50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0
10446 26197 25411 23221 17842 13925 12513 45668 41938 39455
r Se pu t
vic
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t ec
or H
S er
t of
wa
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ar
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ns Re al
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we Po om
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ns
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ica rg
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le
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& t Na
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s Ga
Ch
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ica
ls
m Co
tro Pe
um
FDI
India, which was a minor global FDI player in 2000, is presently the world’s thirteenth largest FDI host country. Presently services sector accounts for approximately 61% of India’s annual FDI inflows and manufacturing accounts for 27%, while primary sector activities (primarily mining and petroleum) accounts for 9% approximately. Eighty percent of post-2000 FDI inflows have been in the form of Greenfield investments. The average investment size also quadrupled from US$ 9 million to US$ 34 million over this period.
EMERGING MARKETS OPPORTUNITIES l INDIA 12
Sectors attracting FDI inflows (% Share)
4% 4% 6% 30% 3%
While the largest recent greenfield investments span various sectors, the largest recent M&As focus on telecommunications, energy and pharmaceutics/healthcare sector. In 2010/11 and 2011/12 analysts forecast a continued expansion of net FDI to $30 billion in both years, portfolio capital inflows of $25 billion and $35 billion and a steady increase in net loan capital inflows to $17 and $25 billion respectively. Overall, our estimates for capital inflows are $73 billion in 2010/11 and $91 billion in 2011/12. This would be adequate to finance the large current account deficit in the two years and leave a modest $31 and $41 billion (2.0 and 2.4 per cent of GDP) to be absorbed in the foreign exchange reserves.
7%
10% 12% 12% 12%
Offshore opportunity
Despite India accounting for 51 per cent market share of the off shoring market, there is still tremendous space for growth as current off shoring market is still a small part of the outsourcing industry. Indian companies are expected to focus on mainland Europe to tap growth opportunities in the offshore technology services market worth tens of billions of dollars. According to Gartner Research, the country’s technology services, dominated by IT services exports worth USD 60 billion will touch USD 3.6 trillion in 2011.
Service Sector Computer Software & Hardware Telecommunications Housing & Real Estate Construction Activities Power Automobile Industry Metallurgical Industries Petroleum & Natural Gas Chemicals
60000
52398
50000
40000
30000
20000
11557
10000
9204 6269 5289 4631 4498 2903 1870 1828
0
M
au
rit
iu
s Si a ng
po
re
US
A
UK Ne
er th
la
s nd
Ja
pa
n
pr Cy
us
an m er G
y Fr
an
ce
E UA
Exports
India’s exports showed an extraordinary annual growth of 36.4% which was highest in 33 -month with consignments in December 2010 raising prospects of the country exporting $215-225 billion worth of merchandise in the current fiscal. IndiExports in December aggregated $22.5 billion, while imports contracted by 11.1% to $25.1 billion, resulting in a narrow trade deficit of $2.6 billion, the lowest in three-year.
EMERGING MARKETS OPPORTUNITIES l INDIA 13
Countries attracting FDI inflows (% Share)
4% 5% 5% 3% 2% 2%
In 2010/11, analysts forecast the value of crude oil imports to be high due to increase in crude prices by almost 15 per cent and an increase in the quantities imported. The oil import bill is expected to rise to $103 billion in 2010/11 and to $120 billion in 2011/12. Amongst the non oil imports, a comparatively slower growth is expected in the case of gold, silver imports and a stronger growth in the remaining segments.
6%
52%
9%
12%
The overall merchandise imports on balance-of-payments basis are expected to rise to nearly $354 billion (up 18 per cent) in 2010/11 and $414 billion (up 17 per cent) in 2011/12. On the export side, petroleum products would be slightly higher than that of imports at 24 and 16 per cent in 2010/11 and 2011/12 respectively.
Mauritius Singapore USA UK Netherlands
Japan Cyprus Germany France UAE
100 80 60
Growth (in per cent)
40 20 0 -20 -40
Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10
Exports Imports
-60
BEST INVESTMENT OPTIONS FOR 2011
The Indian Securities market remained stable during 2009-10, as the global markets too witnessed improved stability with an indication of prospects of firm recovery. However, fiscal concerns remain strong as sovereign risks continue to be a cause of concern in some European countries.
Primary Securities Market and Secondary Securities Market
Indian primary market witnessed renewed activity in terms of resource mobilisation and number of issues during 2009-10, building it further from its relatively subdued pace in 2008-09. In view of the recovery witnessed in equity markets post global financial crisis, companies entered the primary market and investors’ response to public issues was encouraging in 2009-10 when compared to 2008-09. Secondary market also witnessed revival following sharp fall in the previous year in the wake of global financial crisis that had plunged global equity markets. Investors
EMERGING MARKETS OPPORTUNITIES l INDIA 14
24000 19000 14000
20000 18000 16000 14000 12000 10000 Aug-10 Dec-09 Feb-10 Jun-09 Jun-10 Aur-09 Apr-09 Apr-10 Oct-09 8000
Rs crore
9000 4000 -1000 -6000 -11000
FII Investment Mutual Fund Investment
Average BSE Sensex (RHS)
regained confidence and the Indian market rallied post announcement of general election results during May 2009.
Equity Growth
During 2009-10, all the equity markets witnessed uptrend, however, in different magnitude. The Indian benchmark indices namely BSE Sensex and S&P CNX Nifty gave year on year return of 80.5 percent and 73.8 percent respectively in 2009-10. The BSE Small-cap index recorded an increase of 161.7 percent in 2009-10. Among the sectoral indices, highest increase was recorded by BSE Metal index (210.2 percent), BSE Consumer Durables (159.7 percent) and BSE Auto index (150.6 percent). While the metal index reflected the strengthening of metal prices, the general upward trend in the economy and industrial production got reflected in increase in the capital goods and auto indices. The equity market has entered territory that it occupied exactly two years ago and in similar fashion the level of the stock market (the Bombay Sensitive Index or SENSEX) is close to 21,000. Relative valuations are on the richer side and hence analysts expect moderation in index returns for 2011 (in the 10- 15 percent zone from current levels).
Investments in Mutual Funds
Mutual funds after witnessing redemption pressures during later half of 2008-09 post global credit crisis witnessed renewal of investors’ interest in terms of mobilization of resources through new fund offerings as well as existing schemes. The gross mobilisation of resources by all mutual funds during 2009-10 was at Rs.100190 billion compared to Rs.54263 billion during the previous year indicating an increase of 84.7 percent over the previous year. Redemption also rose by 82.2 percent to Rs.99359 billion in 2009-10 from Rs.54546 billion in 2008-09. All mutual funds, put together, recorded a net inflow of Rs.830 billion in 2009-10 as compared to an outflow of Rs.282 billion in 2008-09. The assets under management by all mutual funds increased by 47.2 percent to Rs.6139 billion at the end of March 2010 from Rs.4173 billion at the end of March 2009.
EMERGING MARKETS OPPORTUNITIES l INDIA 15
PE and Venture Capital Investments
The year 2011 is likely to witness maximum number of private equity/venture capital exits in the history of Indian PE industry. The typical cycle of investment-exit is expected to get completed in 2010-11 for many PE investors in India. Private equity firms exited a record 121 companies in India during 2010, while investments almost doubled to $7.97bn from the 2009 figure. Venture capital and private equity investments in India had witnessed a phenomenal growth both in terms of amount invested (from $1.8 billion in 2004 to $22 billion in 2007 before tapering off to $8.1 billion in 2008) as well as the number of deals (from 80 in 2004 to 481 in 2007 and then slowing down to 297 in 2008). There were huge PE investments in technology-led, capital intensive sectors like Telecom, Power and Infrastructure in addition to those sectors that were traditionally preferred by VCPE investors like IT & ITES, Healthcare, etc. Private Equity firms invested $7,974 million over 325 deals in India during the 12 months ending December 2010, compared to $4,068 million across 290 deals during the previous year, according to analysis by Venture Intelligence, a research service focused on Private Equity and M&A activity. (These figures include VC investments and exclude PE investments in Real Estate). With 34 investments worth about $2,141 million, Energy companies topped in terms of investment value during 2010, while Information Technology and IT-Enabled Services (IT & ITES) with 79 investments worth $696 million topped in terms of volume. BFSI with 44 investments worth $1,054 million came second on both parameters.
IPOs in 2010
Indian IPO market has witnessed a strong comeback in 2010 after sluggish performance in 2009 as most of the companies rushed to capital markets to raise funds on encouraging stock markets. Jubilant FoodWorks, Thangamayil Jeweller, Talwalkars Better Value Fitness emerged as top 3 performers in 2010. Meanwhile, Coal India and MOIL were most successful IPOs which received overwhelming response from investor community. IPO 2011 Scenario – India IPO 2011 outlook seems bright with at least 100 public issues in the pipeline, with an indicative size of around Rs 400billion. If the government maintains its Rs 400 billion target for the next fiscal too, total may be Rs 900 billion, up 27% from 2010. Thirty five prospectuses have already got the SEBI’s clearance, while the remaining sixty five are awaiting nod. The country also celebrated its biggest IPO ever this year with the world’s largest coal producer Coal India, collecting $3.5 billion in October. Big private companies, like Jindal Power and Sterlite Energy which are planning an initial public offering in 2011, may have to lower valuation expectations as investors turn choosy, after profiting from state-owned companies’ issues that were priced attractively. IPO outlook for the year 2011 will see a massive bunch of issues hit the market unlike before and the issuers will have to price their trade more sensibly to attract investor attention.
Corporate Bond Market
The number of trades in corporate bonds during 2009- 10 rose by 68.5 percent in comparison to 2008-09. In comparison to increase in number oftrades, increase in the volume of trades during 2009-10 is very significant. This increase is mainly attributed to increase in volume of trades reportedat FIMMDA by 218.5 percent followed by NSE at 206.9 percent and BSE at 42.9 percent.
EMERGING MARKETS OPPORTUNITIES l INDIA 16
PERFORMANCE OF FOREIGN FUNDS IN INDIA
Fund Name AIG India Equity Fund - Reg - Growth Benchmark Derivative Fund - Growth Benchmark Equity And Derivative Opportunities Fund - Growth Benchmark S&P CNX 500 Fund - Growth BNP Paribas China-India Fund - Growth BNP Paribas Dividend Yield Fund - Growth BNP Paribas Equity Fund - Growth BNP Paribas Mid Cap Fund - Growth BNP Paribas Opportunities Fund - Growth BNP Paribas Sustainable Development Fund - Growth Fidelity Equity Fund - Growth Fidelity India Growth Fund - Growth Fidelity India Special Situations Fund - Growth Fidelity India Value Fund - Growth Fidelity International Opportunities Fund - Growth Franklin Asian Equity Fund -Growth Franklin India Bluechip - Growth Franklin India Flexi Cap Fund - Growth Franklin India High Growth Companies Fund - Growth Franklin India Index Fund - BSE Sensex Plan - Growth Franklin India Index Fund - NSE Nifty Plan - Growth Franklin India Opportunity Fund - Growth Franklin India Prima Fund - Growth Franklin India Prima Plus - Growth Franklin India Smaller Companies Fund - Growth HSBC Dynamic Fund - Growth HSBC Equity Fund - Growth HSBC India Opportunities Fund - Growth HSBC Midcap Equity Fund - Growth HSBC Progressive Themes Fund - Growth HSBC Unique Opportunities Fund - Growth ING C.U.B. Fund - Growth ING Contra Fund - Growth ING Core Equity Fund - Growth ING Dividend Yield Fund - Growth ING Domestic Opportunities Fund - Growth ING Midcap Fund - Growth ING Nifty Plus Fund - Growth ING OptiMix Multi Manager Equity Fund - Plan A - Growth JPMorgan India Equity Fund - Growth Performance 1 Mth % 3 Mths % 6 Mths % 1 Yr % 3 Yrs %
-9.69 0.54 0.69 -10.92 -7.41 -9.16 -10.4 -13.59 -11.23 -11.46 -9.11 -9.33 -9.21 -9.92 -6.46 1.36 -8.53 -8.92 -11.22 -10.31 -10.26 -9.99 -12.9 -8.16 -11.24 -8.48 -8.7 -9.4 -15.4 -14.38 -9.79 -10.91 -10.71 -8.67 -8.68 -10.43 -10.28 -10 -12.14 -10.8
-11.01 1.7 2.06 -13.23 -10.59 -13.04 -10.08 -18.49 -15.68 -14.88 -10.65 -10.26 -12.22 -14.27 -6.72 3.1 -7.89 -11.62 -16.62 -9.95 -10.39 -13.03 -17.71 -9.72 -16.73 -9.91 -10.29 -11.33 -22.98 -22.71 -13.25 -16.16 -13.9 -10.59 -12.5 -15.36 -15.54 -10.12 -15.46 -12.27
-3.93 3.25 3.76 -2.75 -1.39 -1.82 1.69 -8.15 -6.05 -4.45 0.01 0.48 -1.27 -3 3.23 9.89 2.5 1.13 -3.89 1.84 1.33 -1.48 -6.76 0.77 -5.71 3.05 1.66 0.67 -9.91 -12.5 2.89 -6.04 -5.8 2.24 -0.96 -5.34 -7.4 1.36 -7.37 -0.38
3.24 4.75 5.46 5 9.14 14.49 11.15 9.65 4.61 5.65 18.34 18.01 13.18 10.59 17.8 17.26 14.86 14.19 4.87 12.23 12.11 9.2 6.05 11.66 6.45 11.39 13.6 10.92 -2.36 -5.39 13.25 7.41 2.66 14.54 17.33 6.88 7.46 11.87 3.71 16.57
-0.11 N/A 5.52 N/A -0.96 7.93 -3.49 -10.27 -14.5 -1.76 7.26 7.61 3.65 N/A 7.39 6.95 7.29 5.6 0.36 0.56 1.09 -2.62 0.78 4.51 -0.74 -3.13 0.17 -2.67 -5.92 -11.95 -5.61 -3.28 2.85 0.27 13.67 -1.66 -2.04 1.22 -7.51 -0.18
EMERGING MARKETS OPPORTUNITIES l INDIA 17
JPMorgan India Smaller Companies Fund - Growth Morgan Stanley A.C.E Fund - Growth Morgan Stanley Growth Fund - Growth Pramerica Equity Fund - Growth PRINCIPAL Dividend Yield Fund - Growth Principal Emerging Bluechip Fund - Growth PRINCIPAL Growth Fund - Growth PRINCIPAL Index Fund - Growth Templeton India Equity Income Fund - Growth Templeton India Growth Fund - Growth
-12.92 -11.2 -11.74 -10.24 -10.22 -13.69 -11.41 -10.29 -5.56 -9.87
-16.98 -13.8 -14.64 N/A -14.89 -17.82 -13.79 -10.47 -4.73 -11.89
-7.05 -3.17 -1.86 N/A -1.39 -7.6 -4.31 1.24 10.21 0.86
12.18 10.69 10.35 N/A 14.21 4.96 4.28 11.76 21.33 12.23
-5.91 N/A -0.19 N/A 4.81 N/A -8.12 0.04 10.68 9.19
Note: Performances till date
FUNDS STATUS IN INDIA
Fund Name
No. of Schemes*
Asset Under Management As on
Billion Rupees Corpus As on Corpus Net inc/dec in corpus
AIG Global Investment Group Mutual Fund Axis Mutual Fund Baroda Pioneer Mutual Fund Benchmark Mutual Fund Bharti AXA Mutual Fund Birla Sun Life Mutual Fund BNP Paribas Mutual Fund Canara Robeco Mutual Fund Daiwa Mutual Fund Deutsche Mutual Fund DSP Blackrock Mutual Fund Edelweiss Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ICICI Prudential Mutual Fund IDBI Mutual Fund IDFC Mutual Fund ING Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund
45 39 33 18 45 238 119 90 11 133 126 39 30 79 163 201 83 379 12 201 85 88 37 152
31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10
8.83 50.13 29.61 29.35 4.12 576.89 50.21 73.92 1.35 62.85 276.68 2.14 2.03 89.01 394.4 878.83 47.29 658.41 20.52 173.48 13.86 64.54 51.96 265.89
30-Sep-10 30-Sep-10 31-Oct-10 30-Nov-10 30-Sep-10 31-Oct-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10
10.20 46.36 41.39 29.90 5.11 613.55 49.65 77.19 3.19 65.21 266.74 2.15 1.98 85.36 421.42 931.06 48.10 697.28 22.00 183.98 14.68 63.30 84.48 284.30
-1.37 3.77 -11.78 -0.55 -0.99 -36.66 0.56 -3.26 -1.84 -2.36 9.94 -0.01 0.05 3.65 -27.00 -52.22 -0.81 -38.87 -1.48 -10.51 -0.82 1.24 -32.52 -18.41
EMERGING MARKETS OPPORTUNITIES l INDIA 18
L&T Mutual Fund LIC Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund Motilal Oswal Mutual Fund Peerless Mutual Fund Pramerica Mutual Fund PRINCIPAL Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Religare Mutual Fund Sahara Mutual Fund SBI Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund
81 62 33 12 2 24 14 72 11 242 110 44 155 175 183 56 227
31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10
31.93 186.95 3.28 23.61 3.01 23.06 11.09 57.64 1.17 1020.66 104.11 3.16 414.98 145.29 208.55 25.33 653.87
30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10
35.43 197.27 2.75 23.51 3.05 20.94 6.30 56.42 1.19 1077.49 107.80 7.56 421.00 142.41 219.64 23.68 676.18
-3.50 -10.32 0.53 0.10 -0.04 2.11 4.78 1.22 -0.03 -56.82 -3.69 -4.40 -6.03 2.88 -11.09 1.65 -22.30
EMERGING MARKETS OPPORTUNITIES l INDIA 19
INVESTMENT NEWS Global investors buy stocks at record high on rising outlook
The Securities and Exchange Board of India, nation’s market regulator stated recently that the Global funds purchased a net 2.24 billion rupees ($49.2 million) of Indian equities on Feb. 4. It stated that foreigners bought 25.8 billion rupees of shares, while they sold 23.5 billion rupees. Overall in 2010, the global investors bought a record 1.33 trillion rupees of shares, raising the benchmark index 17 percent and making it the best performer among the world’s 10 biggest equity markets. They invested 464 billion rupees in bonds last year.
Indian stocks a clear buy: Goldman
Goldman Sachs Asset Management’s chief investment officer for India, Prashant Khemka had stated recently that Indian stocks remains on top pref-erence for buy for the next few years because inflation fears and concerns about overvaluation are unjustified. Khemka believes that Indian compa-nies’ earnings could post annual growth of up to 20 percent over the next three to four years. He said that sluggish growth in the U.S. or Europe is good for India rather than a concern for two reasons: first, exports as a percentage of the economy is much smaller for India compared with most countries; second, it helps to keep in check commodity prices, mainly crude oil.” He further stated that Indian IT sector also benefited from low capi-tal expenditure and high returns, making it an attractive investment opportunity.
Indian Bonds see steady returns
Indian bonds seem an attractive buy for International investors to lock in the highest yields since 2008, with the rupee forecasted to generate the world’s biggest returns after the Turkish lira. According to the Bloomberg data the rupee is expected to generate a return of 13% including interest-rate income this year, more than four times the 3% gain predicted for China’s yuan. Overseas investments in Indian bonds reached an all-time high of $20.3 billion in January as 10-year yields jumped 0.24 percentage point, the first monthly increase since October.
HSBC plans to enter Indian equities
Garry Evans the Global Head of Strategy at HSBC said that the Emerging Markets are fundamentally under owned by global investors. He also stated that HSBC may enter Indian equities in the next one or two quarters. “It is getting at a more attractive price level and the fundamental story still re-mains very attractive for Indian equities”, he says.
Morgan Stanley plans investments in India infrastructure firm
Morgan Stanley’s Global Infrastructure Fund plans investment $200 million for an equity stake in the Indian arm of privately held Spanish construc-tion firm Isolux Corsan, the Economic Times newspaper stated. The paper stated that funds worth $4 billion fund, which was raised in May 2008, will invest in Isolux which builds roads in north India.
EMERGING MARKETS OPPORTUNITIES l INDIA 20
Investors prefer Indian stocks, a lucrative bargain
Betting on emerging markets could yield lucrative bargains and be safer than standing pat in the United States and risking a double dip, hedge fund managers said. Investors are now looking for “undiscovered” companies so as to make more money rather relying on market which are termed more efficient.
CONCLUDING REMARKS
The overall performance of the Indian economy in 2009/10 was beyond expectations. The farm sector which was forecasted to contract showed resilience, growing by 0.2 percent despite the weak South West monsoon. The non- farm sector also followed the same line with strong performance. It is estimated that the Indian economy would grow at 8.5 percent in 2010/11 and 9.0 percent in 2011/12. In the current fiscal year, agriculture will grow at 4.5 percent, industry at 9.7 percent and services at 8.9 per cent. The beginning of the new decade heralds the slow, but steady end of the worst recession in the past 60 years. Global GDP, after declining by 1.1 per cent in 2009, is predicted to increase by 3.1 per cent in 2010, and 4.2 per cent in 2011, with developing economies growing thrice as fast as the developed economies.
Disclaimer - All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. This is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment. This document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance.
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