Growth of Equity Markets in India

INDIAN corporate sector has experienced a complete shift in the last twenty years mainly after the economic liberalization in 1992 initiated by the then finance minister Dr. Manmohan Singh . BSE (Bombay Stock Exchange) has second largest number of domestic quoted companies in the world which is three times higher than china.Indian firms have also started buying firms abroad since the early years of 2000’s.

The total resources of the Corporate sector because of these increasingly profitable economic activities in India and abroad have been increased substantially to 2046.93 billion as in 2008-09 in comparison to 341.65 billion in 1995-96.The total capital raised through the IPO’S(initial public offerings) has increased to 425.95 billion in 2007-08 from 78.64 billion in 1993-94.

But the global financial crisis had there effect on the growing trends of the Indian markets as well and the capital raised through IPO’S declined sharply to 20.82 billion in 2008-09.The pattern of market capitalization on the Indian stock markets as a proportion of the Gross Domestic Product (GDP) was only 12.2 per cent by 1990-91. This has been characterized by sharp fluctuations during the period of liberalization. This share increased to 47 per cent during 1995-96 and further increased to its peak level of 84.7 per cent during 1999-2000. This share however declined to the level of 28.49 per cent in 2002-03 and it sharply increased to the level of 109.3 per cent in 2007-08. It, once again, declined to the level of 58.12 per cent in 2008-09 as a result of the financial crisis of 2008-09.

Further, it is also important to note that the share of debt issues either public or right or through private placements has increased to 93.5 per cent of the total resource mobilisation by the corporate sector in 2008-09 from the level of 56.6 percent in 1995-96. Moreover, the share of private placement in debt and equity issues to the total resource mobilisation has increased significantly from the level of 39.1 per cent of the total resource mobilisation by the corporate sector in 1995-96 to 92.6 percent in 2008-09.

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