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Recent trends in India and global capital market
Recent trends in global capital markets and India.
Dr. prakash piyush (Reader: DAV College Kanpur)
Sandhya and DJ
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Capital Market Overview India
The capital market in India is more than a century old. Its history dates back to 1875, when 22 riders formed the Stock Market Securities (BSE). During the period, the Indian stock market has continually evolved to become one or the most dynamic, modern and efficient markets values in Asia. Today
Confirms Indian market to international standards and best practices both in terms of structure and in terms operational efficiency. Indian stock markets is mainly governed by: a) the Company Act1956, b) the Securities Contracts (Regulation) Act 1956 (Act SCRA), and c) the Securities and Exchange Board of India (SEBI), 1992. A brief review of these regulations above are given below
a) The Companies Act 1956 deals with emission allocation and transfer of securities and various aspects of business management. Provides rules for the disclosure of matters government regulations for the subscription, and issues related to the use of premium and discount on various subjects.
b) establishing SCRA regulations for direct and indirect control of stock exchanges in order to prevent undesirable transactions in securities. Establishing the regulatory jurisdiction by Central Government stocks exchanges, contracts on securities and listing of securities on the exchanges.
c) The Act empowers SEBI SEBI to protect the interest of investors in the securities market, to promote the development of securities markets and regulate the security market.
The Indian stock market consists of primary (new issues) and secondary (stock) market equities and debt. The primary market provides the sales channel of new values, while the secondary market deals in securities trading previously issued. Issuers of securities issuance (create and sell) new values in the primary market to raise funds for investment. They do so either through public offerings or private placement. There are two main types of issuers securities they issue. The corporate entities issue mainly debt and equity instruments (stocks, bonds, etc), while the governments (central and governments state) issue debt securities (dated securities, treasury bills). The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risk and return. A variant of the secondary market is the futures market, where securities are traded for future delivery and payment in the form of futures and options. The futures and options may be in individual stock or basket of stocks like the index. Two exchanges, ie National Stock Exchange (NSE) and the Stock Exchange, Mumbai (BSE) on derivatives trading in individual stock futures, index futures, individual stock options and index options. Derivatives trading started in India in June 2000
Other major cities in the stock market operations
Ahmedabad gained importance next to Bombay with respect to the cotton textile industry. After 1880, many factories originated from Ahmedabad and quickly followed forward. As new plants were floated, the need for a Stock Exchange was held in Ahmedabad and in 1894 the riders formed the "Share Ahmedabad and Association Stock Brokers. "
What the cotton textile industry went to Bombay and Ahmedabad, the jute industry was to Calcutta. Industries also coal and tea were the other major industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870s there was a loud explosion in quotas jute, which was followed by a surge in shares of tea in the 1880s and 1890s, and a coal boom between 1904 and 1908. In June 1908, some major corridors formed "The Calcutta Stock Exchange Association."
In the early twentieth century, the industrial revolution was in the way in India the Swadeshi Movement, and the inauguration of the Tata Iron and Steel Limited Company in 1907, an important step in industrial progress in the framework of the Indian company is reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all businesses in general, enjoyed prosperity extraordinary because of the First World War.
In 1920, the then Madras city demure maiden had the thrill of a stock exchange operating within it, with the name and style of "The Stock Exchange of Madras, with 100 members. However, when boom faded, the number of members 100-3 were reduced in 1923, what came out of existence.
In 1935, the stock market activity improved, especially in southern India where there was a rapid increase in the number of textile mills and many plantation companies were floated. In 1937, a stock exchange was again organized Madras – Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).
Bag Lahore Securities was founded in 1934 and had a short life. Merged with the Stock Exchange of Punjab Limited, which he joined in 1936.
Bags Securities of India – A growing Umbrella
The Second World War broke out in 1939. There was a sharp rise was followed by depression. But in 1943 the situation changed dramatically when India has fully mobilized as a supply base.
On account of the controls restrictive on cotton, gold, grain or other commodities, dealing in them are in the stock market as the only outlet for their activities. They were eager to join the trade and their number was increased by many others. Many new partnerships were formed for the purpose and stock exchanges all over the country were floating.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges – Madrid Stock Share Brokers and the Association Limited and the Delhi Stocks and stock Exchange Limited – were floated and more Later in June 1947, joined in the Delhi Stock Exchange Association Limited.
There are two important indicators of the Indian capital market and SENSEX NIFTY:
What are ingenious and the Sensex?
The Sensex is an "index." What is an Index? An index is basically an indicator. It gives you a general idea about whether most of the populations have increased or most populations have declined. El Sensex is an indicator of all major companies of BSE. The ingenious is an indicator of all the major companies of the NSE. If the Sensex rises, means that stock prices most of the leading companies in the BSE have gone up. If the Sensex goes down, this tells you that the price of the shares of most major towns in the BSE have fallen. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, BSE is Bombay Stock Exchange and NSE is the National Stock Exchange. BSE was found in Bombay and the NSE is in Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and NSE. Most stock trading in the country is done by BSE and NSE. Besides Sensex and the Nifty there are many other indexes. There is an index which gives an idea about whether mid-cap stocks rise and fall. This is called the "Index of the BSE mid-cap." There are many other types of securities markets index.Unless providing professionalized service, small investors and investors Foreigners will not be interested in capital market operations. And the capital markets is one of the main source of long-term financing for industrial projects India can not afford not to damage the way the capital market. In this sense NSE gains vital importance in the capital market in India, but if we see the Sensex graphic and elegant is a great variation.
Fall Down or variability in yields. To measure all these crises FM (Finance Minister) of India has made some steps are:
FM says run the state banks willing to lend to small-medium sectors company
RBI to keep a close watch on liquidity
Finance Minister P Chidambaram today said the Reserve Bank of India (RBI) will keep a close eye on liquidity and state banks are willing to provide credit to small industries and medium enterprises. Finance Minister today met the heads of state banks.
Exports growth falls to 10.4% in September 2008
Exports by 30.9% in April-September 2008
Indian merchandise exports in September 2008 grew 10.4% to U.S. lean $ 13,750,000,000, so the figure of the trends of recession in major export destination U.S. and Europe. On the other growth factors that maintain a good hand of import rose 43.34% to U.S. $ 24,380,000,000, making the trade deficit to more than double the U.S. $ 10,630,000,000 in September 2008 compared to U.S. $ 4,550,000,000 in September 2007. The global financial crisis and trends recession in the major economies have severely impacted the growth of Indian exports, while imports grew rampant.
The rising oil prices put tremendous pressure on the import bill for the month of September 2008. The import share of petroleum imports total increased to 37.31% in September 2008 compared to 34.05% in the corresponding period last year. Oil imports during September 2008 increased 57.1% to U.S. $ 9,100,000,000, while non-oil imports rose 36.2% to U.S. $ 15,280,000,000. Cumulative oil imports April to September 2008 was 59.2% higher than U.S. $ 55,060,000,000, while non-oil imports rose 29.3% to U.S. $ 99,680,000,000 in the corresponding period last year.
Exports during April-September 2008 grew 30.90% to U.S. $ 94,970,000,000 (36.7% to Rs.405118 crore) while imports advanced 38.6% to U.S. $ 154,740,000,000 (44.9% to Rs 661 208 crore).
In rupees, exports at 24.7% to Rs.62641 crore, while imports increased by 61.9% to Rs 111 085 crore in September 2008 as compared to corresponding period last year past.
Trade deficit in April and September was estimated at $ 59,770,000,000, compared with 39.1 billion U.S. dollars in the same period last year.
Zapatero says govt must take all measures to protect the growth
Govt working closely cooperation with other countries for coordinated policy
Prime Minister Manmohan Singh told top business leaders Monday November 3, 2008, the government will take all necessary measures monetary and fiscal policy to protect growth. The Prime Minister also said the government is working closely with other countries to ensure a coordinated policy action to contain the global financial crisis.
RBI bars CRR and SLR 100 points each and the repo rate by 50 basis points
Revised CRR to 5.5%, rates Repo to 7.5%, while SLR is reduced to 24%
RBI has reduced CRR by 100 basis points to 5.5%, SLR by100 basis points up to 24% and the repo rate by 50 basis points to 7.5%, in a surprise move on November 1, 2008. While the market expected a cut, the market is surprised by cut heavy dose of all three types at once.
The CRR cut will take place in two phases of 50 basis points each. CRR will drop to 6.0% effective from the fortnight beginning October 25, 2008 and further down to 5.5% with effect from the fortnight beginning November eighth, 2008. Incidentally, this is also 250 basis points cut in CRR effective from the fortnight beginning October 11, 2008. Thus, in October 2008 alone, we are seeing cut 300 bps and 50 bps cut in November 2008. The last point of 100 basis points cut in CRR will bring Rs 40 000 crore in the banking system. Overall, the 350 basis points more in October and November 2008 will Rs 140 000 crore in the banking system
Since September 16 RBI has been providing additional liquidity support to banks to the extent of 1% of NDTL under Liquidity adjustment facility (LAF), together with exemption from criminal interests. Now, RBI to make this permanent reduction has reduced the statutory liquidity ratio (SLR) by 100 points 24% of basic NDTL effective from the fortnight beginning November eighth, 2008.
Other Measures
RBI has also introduced a special refinancing facilities for all scheduled commercial banks (excluding RRBs) to provide refinance up to 1% the bank in question NDTL from October 24, 2008 in the LAF repo rate to a maximum period of 90 days. RBI, said that during this period, refinancing could be developed in a flexible and reimbursed.
In addition to the reduction of SLR and special refinancing facility, RBI also extended limit liquidity support of banks from 0.5% to 1.5% in LAF NDTL through relaxation in the maintenance of SLR and coverage also extends to NBFCs. In addition, RBI said banks can distribute the total accommodation permitted between mutual funds and NBFCs flexible as your business needs. But RBI directed that this relaxation in the SLR is used exclusively for the purpose of meeting the financing needs of NBFCs and investment funds.
RBI has asked the states with the bulk requirements to deal with currency through their banks. Accordingly, RBI sell foreign exchange through agent banks to increase supply in the domestic forex market or intervene directly to meet the demand and supply gap.
RBI has also allowed the collection of deposits not NBFCs (NBFCs-ND-SI), as a temporary measure to increase loans in foreign currency short-term under the approval route. However, this is subject to compliance prudential norms of capital adequacy and exposure norms.
Furthermore, in the context of currency outflows in recent times, RBI has decided to repurchase date of the SMS in order to provide another avenue for the provision of liquidity of a more lasting peace in the banking system. RBI said this would be calibrated to the market loan program of the Government of India.
Perspective
In the growth front, it is important to ensure that the needs of credit for productive purposes are adequately met in order to sustain the momentum of economic growth. However, the global financial turmoil has had an impact on our financial markets, which has reinforced the importance of focusing on preserving financial stability. The Bank Reserve has reviewed the existing and evolving macroeconomic situation and liquidity conditions in global financial markets and national. Based on this review RBI has taken many measures, including cut in CRR, SLR and repo rate. The total liquidity support through the recent reductions in the CRR, SLR and temporary housing under the EPE is likely to be in the order of Rs.1, 40,481 rupees. With plenty of RBI liquidity scheme announced to promote the general interest measures in the country is likely to reduce in the short term. Some banks have already announced the reduction of interest rates is likely to follow soon. The reduction the SLR would release much-needed liquidity into the system and the reduction of signals in interest rates.
The Reserve Bank will continue to monitor closely the evolution of the global and national financial markets and take swift and effective action, as appropriate.
Rate cuts in the corner
In the wake of pressure on our financial markets following the global financial crisis, the Bank of Reserve announced a series of measures since mid-September 2008 to alleviate both domestic and foreign exchange liquidity. The task of monetary policy has focused management always a balance between price stability, maintaining the growth momentum and maintaining financial stability. The relative emphasis through of these objectives has varied from time to time, depending on the underlying macroeconomic conditions. At this juncture, the country's apex bank has focused on stability Financial due to ease inflation.
India witnesses the effects of global crisis over liquidity crisis, which was reflected in growth significant rates of calls, "the rate at which banks are taking on each other. The month began with 16.51% call rates that climbed weighted to18.53% as the October 10 2008. The review of the status of liquidity, the RBI announced a reduction in CRR by 250 basis points to 6.5% efficiency from the beginning fifteen days, the October 11, 2008. As a result of the reduction of CRR reduction of around Rs 1,00,000 crore is expected to be released in the banking system. The RBI also decided open a 14-day special repo rate fixed window for a notified amount of Rs 20,000 crore to enable banks to meet liquidity needs funds mutual.
Reflecting the impact of these measures, the average rate decreased to 9.92% as on 13 October 2008 and further collapsed to 6.6% as the 17 October and fell below reverse repo rate to 4.16% on October 18, 2008. However, we have seen increasing pressure on call money rates between banks from 25 October, as banks rushed to borrow in the call money market to meet financing needs in a holiday shortened week, while debt auctions also weighed fresh. The RBI has conducted auctions of Rs 7000 crore worth of treasury bills on 29 October, while R is worth 10,000 crore of securities will be auctioned on 31 October. As a result, call rates rose to 8.56% on 25 October and further to 9.35% and 11.26%, respectively, 27 and October 29 2008. The RBI is committed to keeping everything close watch on financial system to prevent pressures building in the financial markets and can take appropriate measures if pressures persist.
The sharp fall in oil prices, driven objectives to promote measures for liquidity and inflation has compounded feelings relief rally in the bond market, raising the price of bonds and on. The yield on the 10 – year benchmark government debt (g-sec 8.24% April 22, 2018) decreased eight months substantially to its low level of 7.5%, October 29, 2008 of 8.44% on October 1, 2008. bond yields and inflation is positively correlated relationship, while trade obligations transmits an inverse relationship for money. During the week ended October 18, 2008, the overall rate popularly called price inflation fell to 10.68%. It was the fifth week were sequential inflation has declined in the week to week basis. The downward trend in inflation will give added impetus to the country's apex bank to act aggressively on financial stability with the new cut in interest rates.
In the along with inflation, we have seen a slight slowdown in the growth of money supply. According to the latest data published by the RBI, the annual growth rate the broad monetary aggregate M3 has more than 20% mark. However, it is still above the comfort zone of the apex bank (RBI with 17% target for the current year).
Central banks worldwide are trying to prevent an economic slowdown as the financial crisis weighed on consumer confidence and business expense. reduced rates of Federal Reserve interest by 50 basis points to 1% on 29 October in order to stimulate economic growth by promoting consumer and business spending. In Asia, China's central bank announced itâ € ™ s one-third reduction by 27 basis points to 6.93%, while Taiwan central bank surprised with a 25 basis point cut lending rates to 3%, the fourth decline in two months. Just as the market expects rate cut to be announced in Japan on Friday, while the European Central Bank and Britain can add to the monetary easing that followed the weak to restrict the negative effects of what could be the worst financial crisis in 80 years and its impact in terms of a long global recession. In the context of these developments global and country and in the light of measures taken by the Reserve Bank in the last month, we are with the exception of the higher dose of medicine in the country's apex bank.
RBI prefers to buy time and leaves all rates unchanged
But cuts GDP growth forecast from 7.5 to 8.0% for FY 2008-09
RBI policy stated medium review term interest rates stable. With effect from the fortnight beginning October 11, 2008, was already reduced the CRR by 250 basis points to 6.5% while that the repo rate was reduced by 100 basis points effective October form20th 2008. But even industry associations hoped to select a new cut in the repo / CRR. Instead, RBI has decided to wait and see before taking further monetary measures.
However, the Reserve Bank has revised the projection of overall real GDP growth in 2008-09 to a range of 7.5 to 8.0 percent, below its own projection of around 8.0% in July 2008, thanks to global and national development.
Highlights
1) The Bank rate has remained unchanged at 6.0 percent.
2) in the repo rate LAF has been kept unchanged at 8.0 percent.
March) The reverse repo rate under LAF remained unchanged at 6.0 percent.
4) The cash reserve ratio (CRR) of scheduled banks is currently at 6.5 percent of net demand and time liabilities (NDTL). In a review of the situation Current liquidity, has decided to keep the CRR unchanged at 6.5 percent of NDTL.
The market's reaction was negative on the policy as participants in the market had expected further rate cut. However there is no change in any relevant cases, and in the CRR and SLR.
The bank apex of the country has already taken many measures in response to developments at the global and domestic market in recent weeks. Therefore, RBI has preferred observe the impact of such measures, instead of rushing through the additional doses of medication.
Meanwhile, for four consecutive weeks, the inflation rate has been falling in the week to week basis. However, RBI has modified the inflation goal for the remaining years, which demonstrates the underlying complained about pressure on the price level. At the same time, we have not seen any change in the target for money supply. With reference to the recently published by the RBI, the growth of the money supply was slightly lower, but still far from the goal of RBI (17%).
Recent measures taken by the apex bank (CRR and cut Repo) will increase liquidity in the market along with the relaxation in ECB norms will play decisive role in the overall monetary allocations for the remainder of the year.
In short, the interest rate unchanged, and the downward revision of GDP growth target as a whole indicate that the apex bank has sought to maintain the balance between growth and inflation. However, this is one of the most critical challenges for policy makers worldwide to make a choice between inflation or stable growth. In the plant of origin, RBI preferred to buy time to see the impact of measures already in place.
Not modification of the types of policies or CRR in the Mid
Mid Term Review of Annual Policy RBI keeps all interest rates unchanged
Dr. D Subbarao, Governor of the Reserve Bank of India, unveiled the Mid Term Review of Annual Policy for 2008-09, 24 October 2008.
RBI has kept the bank rate, Repo Rate, temporary and rates and cash reserve ratio unchanged. Indeed, there is no monetary measures most important have been taken in the mid-term review on October 24, 2008.
RBI has revised the GDP growth projection of India for the year fiscal 2008-09 to a range of 7.5 to 8.0% on October 24, 2008, below its own earlier forecast of around 8.0% in July 2008.
RBI cuts GDP growth forecast for India to 7.5 to 8.0% for fiscal year 2008-09
GDP growth projection of 8.0% cut made in July 2008
RBI has revised the GDP growth forecast for India for fiscal year 2008-09 to a range of 7.5 to 8.0% on October 24, 2008, below its own earlier forecast of around 8.0% in July 2008.
Dr. D Subbarao, Governor of the Reserve Bank India, released the Mid Term Review of Annual Policy for 2008-09 on 24 October 2008. The downward revision in GDP projections were made in this review.
RBI said in its first quarter review in July 2008, it had projected India's projection of real growth of GDP in 2008-09 at around 8.0 percent for political purposes. But RBI said that since then, there have been significant global and national events that have made the outlook uncertain, and have increased the risks to this projection.
In particular, RBI said that global recession may be deeper and protracted than previously expected. Therefore, the negative impact through trade and financial channels for emerging economies like India, have amplified.
RBI warned that if the recession is deeper and the recovery is long drawn as is the current expectation, emerging economies also have to contend with second-round effects in the form of potential terms of trade losses, erosion of export competitiveness and financing Restricted content. These adverse developments are overlaid on the moderation of growth in the industrial and service sectors in the first half of 2008-09.
RBI also said the southwest monsoon conditions and water storage levels support prospects for sustaining the trend growth rate in the medium term Agriculture in 2008-09.
Based on these developments and prospects into account, the Reserve Bank has revised the projection of overall real GDP growth in 2008-2009 to a range of 7.5-8.0 percent
Foreign institutional investment in India
The measures liberalization and reform have therefore attracted the attention of foreign investors leading to an increase in portfolio investment in the capital market of India. In recent years, India has emerged as an important
receiver portfolio investment among emerging market economies. Apart from these major entries, reflecting the cross-border investor confidence in the prospects of the Indian stock markets, except for one year, India received positive flows portfolio each year. The stability of portfolio flows into India is in contrast to the high volatility of portfolio flows in most market economies emerging.
The capital market in India was opened to foreign institutional investors (SIEF) in 1992. The SIEF started investing in markets Indians in January1993. The Indian corporate sector has been allowed to take advantage of international capital markets through American Depository Receipts (ADRs), Global Depositary
Receipts (GDR), Foreign Currency Convertible Bonds (FCCBs) and External Commercial Borrowings (ECB). Likewise, non-resident Indians (NRI) have been allowed companies investing in India. SIEF been allowed in all types of securities, including government securities and have full capital
convertibility. Funds investments have been allowed to open offshore equity funds to invest abroad. FII investment in India started in 1993 as they were allowed to invest SIEF on debt and the Indian stock market in line with the recommendations of the High Level Committee on Balance of Payments. These investment flows have been positive since then with the exception of 1998-99, when capital flows to emerging market economies were affected by the contagion of the East Asian crisis. These investments represent more than 10 percent of the total capitalization of Indian stock market.
Limits of Foreign Institutional Investors
Each FII (investment by itself) or sub-account can not hold more than 10 percent of the capital stock of a company. A sub-account foreign companies under the Category / individual can not own more than 5 percent of
paid up capital of the company. The maximum investment permissible in shares in a company jointly
SIEF all together is 24 per cent of paid-up capital of that company. The limit is 20 percent of capital invested in the case of public sector banks. The ceiling of 24 percent for FII investment can rise to
sectoral cap / Statutory ceiling, subject to the approval of the board and the general body of the company approved a special resolution to that effect. A U.S. cap 1.75 billion dollars is applicable to FII investments in dated
Government securities and Treasury bonds less than 100 percent and the path 70:30. Within this ceiling of U.S. $ 1,750,000,000, a sub-ceiling of U.S. $ 200,000,000 applicable to the route 70:30. (SIEF are required to place their
investment between debt and equity instruments in the ratio of 70:30. However, it is also possible for an FII is declared a 100 per cent debt FII in which case you can make your entire investment in debt instruments.)
A cumulative sub-ceiling of U.S. $ 500,000,000 outstanding investment is set at FII in corporate debt and this is above the sub-ceiling of U.S. $ 1,750,000,000 of debt.
Recent trends in global capital markets:
Several current trends continue to influence world financial markets long after the turbulent current episode ends.
February 2008 • Diana Farrell, Christian S. Fölster, and Susan Lund
Struggling credit markets, stocks fall, and falling dollar have generated anxiety among leaders and policy makers early 2008. Amid the confusion, it is easy to forget that long-term structural change in world capital markets is likely to be more important than fluctuations in the short term, as it did after the fall of 1987 U.S. stock market, the 1992 assault on the British pound, and the disruption of markets 1997 Asian financial.
Recent McKinsey Global Institute (MGI) research reveals several trends that are set to continue over the next years, long after the current bout of market turmoil is over:
continued growth and deepening of global capital markets as investors put more money into shares, debt securities, bank deposits and other assets around the world
the rapid growth of financial markets in emerging economies and the growing links between financial markets in developed countries and developing countries
changing economic weight in Asia, from Japan to China and other fast-growing emerging markets
the growing financial clout of countries the euro area and the importance of the euro
the increasing role of the oil-rich Middle Eastern countries as suppliers of capital to the world, along with the rising new financial centers in the Middle East to complement the rapid growth centers in London and Asia
While these trends reflect a change in financial power of the United States to other parts of the world, the size and depth of U.S. market given a leadership role in international financial institutions stage for the coming years. 1
The exhibitions continue to monitor the progress of these long-term changes. The research is based on several databases that cover MGI owned assets financial cross-border capital flows and foreign investment of more than 100 countries since 1990. Most of the analysis focuses on the evolution until 2006, the latest year for which complete data are available. However, some data also show that many of the major trends continued until the end 2007 and will probably remain for years to come.
The continued growth of global financial assets
The rainfall total of volatile credit markets, 2007 remains to be seen. But longer term, the volume of global financial assets (the value of all bank deposits, government bonds, corporate debt securities and equity) will continue to expand. In the past 25 years, time through both stable and turbulent financial assets have grown strongly. During 2006, its value amounted to 167 trillion U.S. dollars, from 142 trillion dollars the previous year, an increase of 17 percent, more than double the average annual growth rate (8 percent) from 1995 to 2005. href = "# http://www.mckinseyquarterly.com/Economic_Studies/Country_Reports/Long-term_trends_in_the_global_capital_markets_2100?pagenum=2 foot2foot2 "> 2
For many years, as equity and bond markets thrived, bank deposits have represented a declining share of total assets. That trend continued in 2006, but decreased the rate of decline because the absolute value of bank deposits across the world increased by 5.6 trillion U.S. dollars-the twice the average increase from the previous three years. 3 The largest contributor to this increase was the United States, thanks largely to strong income growth and housing boom, which allowed many households to leverage their capital in the ownership of money fast. This source of growth was weak in 2007. Looking ahead, the deposit growth will depend largely on China, which are primary savings vehicle.
Increasing cross-border investment links financial markets
The increasing level of foreign investment is making the world more economically interdependent than it was a few years ago. In late 2006, the total amount of investments border reached the highest level in real terms, in history-74500000 million U.S. dollars of assets. This amount includes foreign investment companies multinationals, purchases of foreign debt and equity securities and investors worldwide, and foreign loans and deposits. Preliminary data indicate that total rose to another record high in 2007 despite the turbulence in Europe and USA credit markets during the second half.
What is also the source and direction of cross-border investment flows are changing. In 1999, the United States was the dominant center of the global financial system. For the year 2006 was the largest single foreign investor and a major hub in the global capital markets, but the euro-zone countries had financial ties to many other parts of the world, including emerging markets. The United Kingdom also has become a major global financial center, and Middle Eastern countries are the main investors in global financial markets, thanks to extra revenues generated by rising oil prices. In 2006, for the first time since the 1970s, oil-exporting countries joined the East Asia as the largest provider network in the world of capital.
Conclusion
The Indian financial system has undergone a structural transformation in the last decade. The financial sector has gained the strength, efficiency and stability by the combined effect of competition, regulatory measures, and policy. While competition, consolidation and convergence have been recognized as the main drivers of the banking sector in the coming years, strengthening the domestic banking system in the public private and combined with the gradual improvement in the presence of foreign banks in a calibrated manner. There has been no improvement in banks' capital position and asset quality that as reflected in the overall increase its capital adequacy ratio and lower bad debt, respectively. Significant improvement in several parameters of efficiency, especially the costs of intermediation suggests that competition in the banking sector has intensified. The effectiveness of the various segments of the financial system also increased. The main challenges facing banking sector are the rational deployment of funds and the management of revenues and costs. At the same time, issues of corporate governance and appropriate disclosures to improve market discipline have received greater attention to ensure greater transparency and accountability. financial sector supervision is increasingly based in risk with emphasis on the quality of risk management and the adequacy of risk containment. Consolidation, competition and risk management are not fundamental question for the future of Indian banking, but the governance and financial inclusion have also emerged as key issues for the Indian financial system. The market capital in India has become effective and modern over the years. It has also become much safer. However, some of the issues to be addressed. Corporate Governance needs to be strengthened. Individual investors are still more distant from the market. The private corporate debt market continues to lag behind the segment of the equity.
About the Author
Dr.Piyush Prakash
Deptt. of Commerce,DAV College
Kanpur
Turnkey Solution for Global Verge Associates.flv