Doing Business in South Asia 2007 - World Bank Report

'Doing Business in South Asia 2007', a report by The World Bank-International Finance Corporation avers that reduced time, cost and hassle for businesses to comply with legal and administrative requirements, make India the top reformer in the sub-continent and among the top 20 reformers worldwide.

India's blueprint for financial reforms includes: ushering in capital account convertibility by 2008, allowing foreign investors to buy Government of India bonds, creating immediately a currency spot market for financial entities and unifying all financial trading under the Securities and Exchange Board of India. If the reforms are fully implemented, the rupee could soon be globally accepted like the US dollar, the euro, the UK pound and the Japanese yen. By 2020, Indian financial markets could be at par with global markets like New York and London.

Mutual Funds

This industry never had it better. Entry-level individual investors, for the first time ever, will account for half the assets under management (AUM). Retail investor share could reach 50 per cent—or more—in view of last year's figures and the folio trends, as per the Association of Mutual Funds in India (AMFI). With new, innovative products—woven around commodities, even real estate—as many as 54,000 distributors (including 80 banks), and retail investors will flood investments in MFs.

Total asset size of the Mutual Funds (MF) industry grew four times to US$ 65 billion since 1993. Its contribution to the country's gross domestic product rose to almost 10 per cent in the last decade, as per Deutsche Bank Research (DBR). Equity asset under managements (AUMs) of fund houses are going stronger, with sturdy capital market growth. AUMs of the 30 fund houses increased 2.2 per cent (monthly basis) to US$ 259.6 billion in January 2007 from US$ 32.2 billion in December 2006.

DBR analyst Jennifer Asuncion-Mund reportedly says, "Combined with rising per capita income, improving awareness of capital market investing and pension fund reforms would make mutual fund investing a viable long-term investment vehicle".

Three top global asset management and investment banks—American International Group, JP Morgan Asset Management and Japan's Mitsubishi UFJ Securities—are already vying for a place in the second fastest growing economy in the world.

The Boston Consulting Group expects the total assets managed by all funds (mutual funds, international funds, private banking, including portfolio management services, unit-linked insurance and pension funds) to grow from the current US$ 170 billion to US$ 1,300 billion—more than six-fold—by 2015.

Stock Markets

The Sensex, in the last decade, has almost quadrupled. With Indian stock markets booming, global players avidly seek a share of the pie.

The New York Stock Exchange (NYSE), which recently acquired a 5 per cent stake in National Stock Exchange (NSE), sought to raise its holding in India's largest bourse to 20 per cent. NYSE, private equity firm General Atlantic, Goldman Sachs and Japan's Softbank Asian Infrastructure Fund recently bought 5 per cent each in NSE. Others like Nasdaq and some European exchanges are keen on buying a stake in Bombay Stock Exchange (BSE).

Foreign Institutional Investment (FII) in equities rose to an all-time high of US$ 50.025 billion on December 1, 2006. Add to this about US$ 1.13 billion invested by FIIs in debts, and the total FII investment in the country since their entry here soars to over US$ 51.13 billion, as per SEBI data. Total FII net investment in India's stock market was US$ 41.10 billion.