December
31, 2007 India's Key Market
Index Closes
47 Percent Up By Arvind Padmanabhan
New Delhi
Fuelled by a robust performance of Indian stock markets in 2007,
which sent a key stock index soaring over 47 percent, Indian
companies mobilised a record amount from public offerings during the
year, estimated at $8.3 billion.
As many as 95 companies came out with initial public offerings in
the first 11 months of the year to raise that amount, compared with
78 public offers worth $7.23 billion in 2006, says Ernst and Young
in a study earlier this week.
The record mobilisation from capital markets was also facilitated by
an equally strong performance of stock markets, with the sensitive
index (Sensex) of the Bombay Stock Exchange, a benchmark for the
performance of Indian equities, rising 47.15 percent during the
year, as on Dec 31.
"The surge in initial public offering activity in India is a clear
reflection of the growth in the Indian economy and the investor
confidence in India Inc," said R. Balachander, head for public
offers with Ernst and Young India.
"The corporate sector is on high growth trajectory resulting in
marked increase in their need for capital," he said, as India was
ranked seventh in the world in resource mobilisation through public
offerings in 2007.
A similar annual review by Prime, a noted database on capital
markets, estimated the mobilisation by Indian companies from the
capital markets - both initial and follow-up offerings - at
Rs.451.37 billion ($11.28 billion).
"This is 83 percent higher than the previous year, which had seen
raisings of Rs.246.79 billion ($6.17 billion)," said Prithvi Haldea,
chairman and managing director of the database.
"A highlight of the year was the entry of real estate sector in
listing domains in a big way. Real estate companies through 12
issues dominated with 33 percent share at Rs.151.85 billion ($3.79
billion), led by DLF."
While the robust performance of the Indian economy, which grew by
over 9 percent during the year, was a major contributing factor, the
strong gains in secondary markets also fuelled the unprecedented
growth of the primary market offering.
Even though the stock markets faced several tremors mid-year, which
had sent the Sensex crashing on many an occasion, the year ended on
quite a positive note, as reflected by the handsome gains made by
this barometer index.
By mid-May, in fact, when the Sensex was just above the 14,500-point
level, market capitalisation at the Mumbai exchange topped the $1
trillion mark.
The index, a basket of 30 representative stocks, stood at 13,786.91
points at the close of 2006 and in the 52 weeks of trading during
2007, it scaled many a peak to decisively end above the 20,000-point
mark to close at 20,286.99 points on Dec 31.
This translated into a gain of 6,500.08 points, or 47.15 percent.
If large-cap stocks were the flavour of 2006, small-cap shares
dominated this year - with the index for such stocks rising 93.67
percent. Even the mid-cap index outperformed the Sensex, by gaining
over 68 percent, as per data with the 138-year-old BSE.
The bourse's index for 500 stocks was up 61 percent, while those for
200 and 500 stocks gained over 58 percent each.
But not all counters could give matching returns, as sector-specific
indices of BSE showed. The IT index actually fell 13.67 percent,
while those for auto and technology stocks grew by just 1.39 percent
and 8.20 percent, respectively.
On the other hand, the metal index clearly reflected the flavour of
2007, as the index outperformed the Sensex twice over, and ended the
year with a gain of over 120 percent, while that for power was not
far behind with 119.33 percent.
Consumer goods index was another that registered triple-digit
growth, while the gains made by the indices for banking, public
sector undertakings, realty and banking, ranged between 60 and 85
percent.
While some policy issues like curbs on the participatory notes of
foreign funds caused the markets to fall, other decisions like
permission to registered trusts and state-run enterprises to invest
in stock markets boosted sentiments.
The year also saw Indian markets rising on the strengths of domestic
players, as on many a week, key indices soared despite net outflow
of funds from the foreign institutional investors.
Yet, these funds ended the year with a net investment of $16.995
billion in the Indian stock markets in 2007, as against $7.993
billion last year, showed data with the markets watchdog, Securities
and Exchange Board of India (SEBI).
"Indian equities produced another stellar year with absolute and
relative gain," said Ridham Desai, a noted equity analyst with
Morgan Stanley, commenting on the performance of the Indian share
market, as part of the global strategy bulletin.
"India is on course to finish the year as the third-best emerging
market. Mid- and small-caps regained their edge over large caps,
though the bulk of this has happened in the closing stages of the
year."
Looking ahead, analysts and merchant bankers predicted the
fundamentals of the Indian economy to remain strong during 2008, as
a result of which the equities market should continue to perform
well.
"While a global economic slowdown and credit market dislocation
could adversely affect the Asian markets, the domestically-driven
Indian market is relatively insulated," said foreign brokerage firm
USB.
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