The whole world wants to invest in India. But how to do this successfully? Written by two Indian financial experts with a seasoned expert of the Chicago Mercantile Exchange, this book tells you the why and how of investing in India. It explains how India's financial markets work, discusses the amazing growth of the Indian economy, identifies growth drivers, uncovers areas of uncertainty and risk. It describes how each market works: private equity and IPOs, bonds, stocks, derivatives, commodities, real estate, currency. The authors include a discussion of capital controls in each section to address the needs of foreign investors. Learn about the the markets, the instruments, the participants, and the institutions governing trading, clearing, and settlement of transactions, as well as the legal and regulatory framework governing financial securities transactions. Audience Finance professionals in the securities, bond, and currency, derivatives, and commodities industry, portfolio managers, traders, investment bank analysts. ÍNDICE CONTENTS Foreword xiii Preface xv 1. The Economy 1 1.1 Overall Growth Experience 1 1.2 Understanding India?s Post-Independence Trajectory 3 1.3 Interpreting the Growth Experience 5 1.4 Trends and Volatility in GDP Growth 21 1.5 Conclusions 30 2. The Firms 33 2.1 The CMIE Database 33 2.2 The Large Nonfinancial Firms of India 34 2.3 Role of Equity Financing 40 2.4 Regulation of Firms 43 3. Private Equity and the IPO Market 45 3.1 Private Equity Investment 46 3.2 The IPO Market 52 4. The Public Equity Market 55 4.1 Products, Venues, Market Design 55 4.2 Liquidity 64 4.3 Derivatives 68 4.4 Risk and Return 72 4.5 Role of Indian Equity in Global Portfolios 79 ix x Contents 5. Government Bonds 81 5.1 Products in the Government Debt Market 81 5.2 Markets 90 5.3 Regulation and Market Access 93 5.4 Elusive Liquidity 94 6. Corporate Bonds 95 6.1 The Products 95 6.2 Markets 106 6.3 Secondary Market Trading 108 6.4 Regulation and Next Steps Forward 109 7