Commodity Market in India

Organized commodity derivatives in India has their old history, it was started in 1875, barely about ten year after they started in Chicago. However, many feared that derivatives fuelled superfluous speculation and were detrimental to the healthy functioning of the markets for the underlying commodities. As a result, after independence, commodity options trading and cash settlement of commodity futures were banned in 1952. A further gust came in 1960s when, following several years of severe draughts that forced many farmers to default on forward contracts and even many committed suicides, forward trading was banned in many commodities considered primary or essential. Consequently, the commodities derivative markets dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in policy, started actively encouraging the commodity derivatives market. Since 2002, the commodities futures market in India has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities.

Revolution in commodity trading:

After the Indian economy embarked upon the process of liberalization and globalization in 1990, the Government formed a Committee headed by Prof. K.N. Kabra in 1993 to examine the role of futures trading. The Committee recommended allowing futures trading in17commodity groups. It also recommended strengthening of the Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing options trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading were permitted in all recommended commodities.

Commodity futures trading in India remained in a state of hibernation for nearly four decades, essentially due to suspicions about the benefits of derivatives. Lastly a realization that derivatives do perform a role in risk management led the government to change its stance. The policy changes favoring commodity derivatives were also facilitated by the enhanced role assigned to free market forces under the new liberalization policy of the Government. Indeed, it was a timely decision too, since internationally the commodity cycle is on the upswing and the next decade is being touted as the decade of commodities.

SCOPE OF COMMODITY FUTURE IN INDIA:

India is amongst the top-5 producers of most of the commodities, in addition to being a major consumer due to their consumption storey. Agriculture contributes about 22% to the GDP of the Indian economy. It employees around 57% of the labor force on a total of 163 million hectares of land. Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major center for trading of commodity derivatives. It is unfortunate that the policies of FMC during the most of 1950s to 1980s suppressed the very markets it was supposed to encourage and nurture to grow with times. It was a mistake other emerging economies of the world would want to avoid. However, it is not in India alone that derivatives were suspected of creating too much speculation that would be to the detriment of the healthy growth of the markets and the farmers. Such suspicions might normally arise due to a misunderstanding of the characteristics and role of derivative product.

It is important to understand why commodity derivatives are required and the role they can play in risk management. It is common knowledge that prices of commodities, metals, shares and currencies fluctuate over time. The possibility of adverse price changes in future creates risk for businesses. Derivatives are used to reduce or eliminate price risk arising from unforeseen price changes. A derivative is a financial contract whose price depends on, or is derived from, the price of another asset.

Two important derivatives are futures and options.

(i) Commodity Futures Contracts: A futures contract is an agreement for buying or selling a commodity for a predetermined delivery price at a specific future time. Futures are standardized contracts that are traded on organized futures exchanges that ensure performance of the contracts and thus remove the default risk. The commodity futures have existed since the Chicago Board of Trade (CBOT, www.cbot.com) was established in 1848 to bring farmers and merchants together. The major function of futures markets is to transfer price risk from hedgers to speculators. For example, suppose a farmer is expecting his crop of wheat to be ready in two months time, but is worried that the price of wheat may decline in this period. In order to minimize his risk, he can enter into a futures contract to sell his crop in two months' time at a price determined now. This way he is able to hedge his risk arising from a possible adverse change in the price of his commodity.

(ii) Commodity Options contracts: Like futures, options are also financial instruments used for hedging and speculation. The commodity option holder has the right, but not the obligation, to buy (or sell) a specific quantity of a commodity at a specified price on or before a specified date. Option contracts involve two parties - the seller of the option writes the option in favor of the buyer (holder) who pays a certain premium to the seller as a price for the option. There are two types of commodity options: a 'call' option gives the holder a right to buy a commodity at an agreed price, while a 'put' option gives the holder a right to sell a commodity at an agreed price on or before a specified date (called expiry date). The option holder will exercise the option only if it is beneficial to him; otherwise he will let the option lapse. For example, suppose a farmer buys a put option to sell 100 Quintals of wheat at a price of $25 per quintal and pays a 'premium' of $0.5 per quintal (or a total of $50). If the price of wheat declines to say $20 before expiry, the farmer will exercise his option and sell his wheat at the agreed price of $25 per quintal. However, if the market price of wheat increases to say $30 per quintal, it would be advantageous for the farmer to sell it directly in the open market at the spot price, rather than exercise his option to sell at $25 per quintal.

Futures and options trading therefore helps in hedging the price risk and also provide investment opportunity to speculators who are willing to assume risk for a possible return. Further, futures trading and the ensuing discovery of price can help farmers in deciding which crops to grow. They can also help in building a competitive edge and enable businesses to smoothen their earnings because none hedging of the risk would increase the volatility of their quarterly earnings. Thus futures and options markets perform important functions that cannot be ignored in modern business environment. At the same time, it is true that too much speculative activity in essential commodities would destabilize the markets and therefore, these markets are normally regulated as per the laws of the country.

STRUCTUE OF COMODITY MARKET IN INDIA :

Forward Market Commission (FMC)

FMC is the apex organization to take care and act as the watchdog for the commodity markets in India. It was set up in 1953 under the Forward Contracts (Regulation) Act, 1952 and Managed by Ministry of Consumer Affairs and Public Distribution, Govt. of India.. Currently Shri B.C.Khatua, is the Chairman of FMC

Multi Commodity Exchange (MCX)

Promoted by Financial Technologies (India) Ltd. And various PSU Banks It commenced its operations on 10th November 2003 Headquartered in Mumbai, MCX is led by an expert management team 62 commodities; volumes 5893 crores per day Over 3000 clients trading through more than 500 brokers daily Expected turnover-50000 crores a day by 2012 Gold, Silver, Crude & Mentha oil contributing to turnover

National Commodity Exchange (NCDX)

Promoters - ICICI Bank, LIC, NABARD, NSE Punjab National Bank (PNB), CRISIL Ltd, Indian Farmers Fertilizer Cooperative Limited (IFFCO) and Canara Bank It commenced its operations on December 15, 2003.NCDEX is located in Mumbai and offers facilities through more than 390 centers in India.55 commodities; volumes 3296 crores per day Chana, Urad, Guar & Silver contributing to turnover

NMCE, Ahmadabad

National Board of Trade, Indore (NBOT) :

It incorporated on July 30,1999 to offer integrated, state-of-the-art commodity futures exchange. It was incorporated to offer transparent and efficient trading platform to various market intermediaries in the commodity futures trade. Today NBOT is one of the fastest growing commodity exchanges recognized by the Government of India under the aegis of the Forward Markets Commission. Within a short span of seven years, NBOT has carved out a niche for itself in the commodities market. With a humble beginning of trading in February 2000 its average daily volume has reached a staggering 60,000 MTs (approx.) in terms of Soya oil.

National Multi-Commodity Exchange(NMCE):

National Multi Commodity Exchange of India Ltd. (NMCE) was promoted by commodity-relevant public institutions, viz., Central Warehousing Corporation (CWC), National Agricultural Cooperative Marketing Federation of India (NAFED), Gujarat Agro-Industries Corporation Limited (GAICL), Gujarat State Agricultural Marketing Board (GSAMB), National Institute of Agricultural Marketing (NIAM), and Neptune Overseas Limited (NOL). While various integral aspects of commodity economy, viz., warehousing, cooperatives, private and public sector marketing of agricultural commodities, research and training were adequately addressed in structuring the Exchange, finance was still a vital missing link. Punjab National Bank (PNB) took equity of the Exchange to establish that linkage. Even today, NMCE is the only Exchange in India to have such investment and technical support from the commodity relevant institutions

Except the above installation there are 22 other exchanges operates in India who provides trading of commodities however more than 90% trade executes in above mentioned exchange.

Conclusion:

Commodity trading in India was started with the objective to safeguard the farmers and provide the hedge to the industry and to discover the price of the commodity however due to lack of awareness and inadequate infrastructure the light of its benefit are miles away from the farmers and so it has became the traders and speculators paradise .Indian farmers and small traders are not so capable to understand the mathematics of commodity trading and the operational complexity involved in trading .The use of modern communication devise make them more difficult to handle .The commodity market requires more reform and more participation from the farmer and trader to get its real goal.

Pankaj Kumar

Pharma Update

PHARMA UPDATE

Sanofi-Aventis Scans India for Acquisitions"; "Glaxo Eyes Piramal, Dr. Reddy's Labs"; "MNCs Eye Indian Pharma": If these and other recent headlines are any indication, India's pharmaceutical companies are in play for multinational suitors. According to some industry observers, more acquisitions are almost certain once valuations improve -- whether for diversification, exposure to emerging markets or other purposes.

Pharmaceutical, health care and biotechnology was one of the busiest sectors on India's Deal Street in 2008. At US$5.57 billion, it was second in terms of total value, marginally below telecommunications, which had total transactions worth US$5.78 billion. The pharma sector had 57 deals, second only to the 102 deals in the IT and IT services sector.

In June 2008, the acquisition of Ranbaxy Laboratories -- India's biggest drugmaker at the time -- by Japanese firm Daiichi Sankyo set the ball rolling. At US$4.6 billion, it was the largest of India's deals for the year. Since then, the Dabur Group, which operates in the wellness space, sold a 73% stake in its Dabur Pharma prescription business to Singapore-based Fresenius Kabi for US$200 million. Perrigo, an over-the-counter firm based in the U.S., picked up an 85% stake in Mumbai-based Vedants Drugs & Fine Chemicals for US$12 million. Wockhardt, based in Mumbai, hawked its nutritional supplement brands Farex, Protinex and Dexolac to U.S.-based Abbott Laboratories for US$130 million and its animal health division to Vetoquinol of France for US$40 million. And Sanofi-Aventis of France acquired Hyderabad-based vaccine major Shantha Biotechnics for nearly US$800 million.

The Sanofi-Aventis strategy in India in the past has been around a smaller number of products. The company's management in India is now focusing more on the base business and has accelerated their growth rate from about 7% per year to around 15% to 16%. Vaccine is clearly an area where they were in deficit -- pretty much everybody is. And that is why Shantha was so important. The company is still on the takeover trail. There will be more shopping on the horizon. The objective is to build the company's vaccine, biotechnology and non-prescription-medicine businesses, as well as expand in emerging markets.

A team from Sanofi, which had US$42 billion in revenues last year, visited India recently and held talks with Mumbai-based Piramal Healthcare and the privately held, Bangalore-based Micro Labs. GlaxoSmithKline (GSK), which had US$45 billion in revenues, is widely reported to be looking to acquire a 5% stake in Dr. Reddy's Laboratories; it already has a marketing deal in place. Pfizer, meanwhile, has struck alliances with Aurobindo Pharma and Claris Lifesciences. A lot of other proposals of the same kind are floating around, some of which involve second-tier companies, including Torrent Pharmaceuticals, Unichem Laboratories, Shasun Chemicals and Orchid Chemicals & Pharmaceuticals. The promoter families of quite a few Indian drug companies are open to the idea of selling to a multinational company but are waiting for valuations to improve. Some of the big deals being spoken about haven't gone through because of valuations.

Four Important Trends

Why has Indian pharma come under the takeover lens? Four important global trends are driving MNCs' strategies:

First is cost optimization, for which you need to create a flexible business model.

The second is getting into businesses that are different -- vaccines, for instance.

The third is the pursuit of profitable growth, for which you need to focus on emerging markets, which give you good margins.

Finally there is the move into generics, for which many companies have to look at inorganic growth."With growth expected to taper off in the U.S. and other developed countries, emerging economies like India are expected to drive future expansion. The Indian pharmaceutical market had estimated revenues of US$17 billion in fiscal 2008. The domestic formulation business, which was US$8 billion, is estimated to grow at over 12% annually to reach US$14 billion by fiscal 2013.

The key growth drivers in the domestic market, are increasing per-capita income, growing insurance penetration, better health awareness, higher government expenditure, adherence to IPR (intellectual property rights) norms, and shifts in disease profiles. Also, the country has established itself as a leading player in generics manufacturing as well as contract research and manufacturing. This is of interest to MNCs, which are currently facing a relatively low pipeline of new innovator drugs. Increased pressure from governments in several developed countries to reduce health care costs has also forced large pharma companies to look at enhancing their generics portfolio.

Getting access to India's domestic market and adding generics to portfolios are two primary drivers behind the increasing number of takeovers by MNCs in the pharma sector. Until recently, India was not an important market for big pharma companies because it accounted for only a very small percentage of their global revenues. But over the next 10 years, India is expected to become a multibillion-dollar market, among the top 10 markets globally. Indeed, Consumer spending on health care in India increased from 4% of gross domestic product in 1995 to 7% in 2007, and is expected to rise to 13% by 2015. However, tapping the Indian market will require a tailored approach. Cost efficiencies are important, price points are important. There are lots of poor people and different disease profiles.

On the generic front, earlier, generics used to be the lower end of the game, the bottom of the barrel. But those days have changed. Now there is a big drive for generic substitution wherever possible, because the prices collapse by 90%. All the big pharma players want to take a bigger role in generics. They realize that having generics in their portfolio gives them an extra arrow in the quiver while dealing with policymakers globally. One way is to acquire Indian drug-makers that have proven skills in manufacturing can keep their operations lean and have cost-effective generic development methods.

Expansion by global pharma companies into emerging markets like India becomes imperative as about US$103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of such companies. Thus they are trying to augment their revenues by acquiring or aligning with companies in the generics business. The acquisition of Ranbaxy is an apt example in this context.

The industry itself isn't necessarily looking to sell out. The Indian Pharmaceutical Alliance, a lobby of 12 top home-grown drug-makers, was seeking the government's help to prevent acquisitions by foreign companies, through funding to protect and promote the industry and through tackling such issues as patents and price controls.

A Fragmented, Vulnerable Market

The Indian market is vulnerable because it is fragmented. At the end of 2008, according to pharma research firm ORG IMS, the top five companies had a combined market share of only 22%. Cipla Ltd. had the largest, having ousted Ranbaxy from the top spot, yet its share was only 5.3%. The top 20 companies had a total market share of about 57%. Globally, the 10 largest companies account for about 40% of sales.

According to Espicom Business Intelligence, India is the world's fourth-largest producer of pharmaceuticals by volume, accounting for around 8% of global production. In value terms, India's production accounts for around 1.5% of the world total, ranking India thirteenth. While there are around 270 large R&D-based pharmaceutical companies in India, including multinationals, government-owned and private companies, there are also around 5,600 smaller licensed generics manufacturers, although in reality only around 3,000 companies are involved in pharmaceutical production. Most small firms do not have their own production facilities, but operate using the spare capacity of other drug manufacturers. That is the fragmented market of pharmaceuticals in India.

The intense competition in a highly fragmented market is posing a great challenge. The stage is set for the next phase of growth accompanied by consolidation. India is one of the most competitive markets in the world, primarily because it is very fragmented. No one enjoys dominance and that is unlikely to change in the near future.

Cost considerations are also driving MNCs' interest. India offers the benefits of low-cost R&D, a domain in which it is estimated to capture a 10% to 20% share of the world's business by 2020 from less than 1% currently. Globally, pharmaceutical companies are shifting their outsourcing activities to Asian markets, with India emerging as one of the most attractive destinations, according to an August 2009 report by the Organization of Pharmaceutical Producers of India (OPPI) and Ernst & Young (E&Y). India is a fast-growing custom manufacturing outsourcing destination with a growth rate of 43% that is three times the global market rate. This is driven by its ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities.

The report rated India highest in terms of cost-efficiency attractiveness among six destinations including China, Eastern Europe, Puerto Rico, Singapore and Ireland. India's cost efficiency is driven by its low manufacturing cost, which is only 35% to 40% of the cost of manufacturing in the United States, supported by its low installation and manpower cost. In drug discovery and development services, India is emerging as a hot spot, growing at around 65%. India offers significant cost arbitrage in end-to-end R&D with potential savings of 61% as compared to the United States.

Another E&Y study, developed with the Federation of Indian Chambers of Commerce and Industry (FICCI), says India enjoys significant cost arbitrage in the conduct of clinical trials, which includes infrastructure, patient recruitment, manpower, data management and processing costs. "The cost of these activities in India is typically 40% to 60% lower than in developed countries and around 10% to 20% lower than in other emerging economies," says the study. At least eight of the top 10 pharma companies internationally are tapping such allied services in India. The sector is growing by 21% annually in India, compared with 7.5% globally.

A Growing Affluent Market

MNCs have another reason to eye India. The FICCI-E&Y study says that high-value drugs from MNCs could produce up to US$8 billion in sales by 2015. The population in India's highest income class is expected to grow to 25 million in 2015 from 10 million today, so more people will be able to afford high-value patented drugs. MNCs are increasingly restructuring their operations with global parents increasing their equity stakes in their Indian affiliates. Companies such as Bristol-Myers Squibb and Merck that had exited the Indian market have staged a reentry. Lifestyle disorders will make people more vulnerable to ailments such as cardiovascular diseases and diabetes. Secondly, medicines will become more affordable to a larger number of people as the size of India's 300 million middle class is rapidly increasing and income levels are also going up.

But the entry of MNCs does not necessarily mean more expensive medicines. It could lead to the introduction of patented drugs for lifestyle diseases. But India will continue to need affordable medicines, particularly for acute ailments. These are typically served by generic medicines which are affordable and, in certain cases, their prices are regulated by the government. While we can expect patented medicines to be launched in India, particularly due to growing confidence in Indian IPR laws, affordable generic medicines will continue to comprise a very significant section of the market.

Pharma takeovers elicit so much attention because health care is of key importance everywhere. Health care and pharmaceuticals will continue to be of strategic interest for the country. The pharmaceutical industry will continue to be watched and followed keenly by the media as well as the government, unlike several other sectors. That is why industries such as advertising and market research have become almost 100% foreign-owned without a murmur, while pharma takeovers have a host of critics.

The criticisms notwithstanding, MNCs obviously are attracted to India. From the Indian point of view, it makes sense to join hands or sell out. Intense competition is one reason. A patent regime established in 2005 that limits the industry's ability to introduce new generic drugs is another. With the increasing need for capital to sustain momentum, a number of Indian pharmaceutical companies will find it difficult to pursue the growth path on their own. Such companies will be ideal candidates to join hands with strong multinational companies.

Indian companies face other problems, too. Exports, mainly of generics, have become an increasingly important business component. But some Western countries are setting up what are perceived as non-tariff barriers. For example, the U.S. Food & Drug Administration has taken action against several companies; early this year, it banned 28 of Ranbaxy's drugs, saying the company had falsified data and test results in approved and pending drug applications. Also, several shipments of generic drugs destined for Latin American countries have been seized in European ports. A Dr. Reddy's consignment of losartan, used to lower blood pressure, was seized in transit to Brazil by Dutch customs officials. The U.S. multinational DuPont holds the patent for losartan in the Netherlands. Several such seizures have occurred that the Indian industry considers illegal because the drugs were in transit and not meant for sale in any European market.

Indian Pharma 'At a Crossroads'

Indian companies are at a crossroads. Because of the increasing competition, winning in commodity generics in developed markets will be difficult. Today, valuations are fantastic. So divest. If you do not divest, you have to invest. But for that you need resources. Ranbaxy and Shantha got very rich valuations, some three to five times sales.

The "rich" valuations raise a different issue: Are MNCs paying too much? Consider what happened to Daiichi after the Ranbaxy purchase. At the time of the acquisition, a leading business magazine wrote in its headline "Japan's Daiichi Sankyo makes Ranbaxy Laboratories an offer it can't refuse." The Singh brothers, Malvinder and Shivinder, sold their 34% stake to the Japanese major for US$2 billion. Daiichi paid a similar sum in an open offer to ordinary shareholders; it now owns 63.9% of the company. At the end of the year, the Japanese company was licking its wounds. It had to write down US$3.84 billion after Ranbaxy shares plunged 66% on the Bombay bourses, in line with the rest of the market. Four years of Daiichi's profits were wiped out. That doesn't seem to have fazed others. Japan's largest and oldest pharma giant, Takeda Pharmaceutical, is keenly eyeing Ahmedabad-based Torrent Pharmaceuticals as a possible acquisition.

Takeda and Daiichi are looking to the future. When the Indian pharma industry itself looks to the future, what does it see? Just a few years ago, Indian companies seemed to be on the takeover trail. The roles have now reversed in the Indian pharma M&A space. In the growth years of 2005 to 2008, companies like Wockhardt, Dr. Reddy's and Ranbaxy were busy shopping abroad to expand their global footprint. In 2007-08 alone, Indian drug companies made 14 acquisitions abroad at a cost of US$1.3 billion. Some deals have gone wrong. Wockhardt is selling off because it borrowed too much to fund acquisitions and ended up with financial problems. Sun Pharma is still fighting a legal battle over its bid for Taro of Israel. The experiences of some others -- Dr. Reddy's with Betapharm of Germany for one -- have not turned out well: The Company has had to write off around US$300 million on account of this German subsidiary.

Is it the end of the Indian pharma MNC? Indian generic MNCs will come up. Sun Pharma is trying. So is Dr. Reddy's. They could become generic MNCs. Companies that have ambitions are not going to give up. This is just a pause.

Pharma Update

PHARMA UPDATE

Sanofi-Aventis Scans India for Acquisitions"; "Glaxo Eyes Piramal, Dr. Reddy's Labs"; "MNCs Eye Indian Pharma": If these and other recent headlines are any indication, India's pharmaceutical companies are in play for multinational suitors. According to some industry observers, more acquisitions are almost certain once valuations improve -- whether for diversification, exposure to emerging markets or other purposes.

Pharmaceutical, health care and biotechnology was one of the busiest sectors on India's Deal Street in 2008. At US$5.57 billion, it was second in terms of total value, marginally below telecommunications, which had total transactions worth US$5.78 billion. The pharma sector had 57 deals, second only to the 102 deals in the IT and IT services sector.

In June 2008, the acquisition of Ranbaxy Laboratories -- India's biggest drugmaker at the time -- by Japanese firm Daiichi Sankyo set the ball rolling. At US$4.6 billion, it was the largest of India's deals for the year. Since then, the Dabur Group, which operates in the wellness space, sold a 73% stake in its Dabur Pharma prescription business to Singapore-based Fresenius Kabi for US$200 million. Perrigo, an over-the-counter firm based in the U.S., picked up an 85% stake in Mumbai-based Vedants Drugs & Fine Chemicals for US$12 million. Wockhardt, based in Mumbai, hawked its nutritional supplement brands Farex, Protinex and Dexolac to U.S.-based Abbott Laboratories for US$130 million and its animal health division to Vetoquinol of France for US$40 million. And Sanofi-Aventis of France acquired Hyderabad-based vaccine major Shantha Biotechnics for nearly US$800 million.

The Sanofi-Aventis strategy in India in the past has been around a smaller number of products. The company's management in India is now focusing more on the base business and has accelerated their growth rate from about 7% per year to around 15% to 16%. Vaccine is clearly an area where they were in deficit -- pretty much everybody is. And that is why Shantha was so important. The company is still on the takeover trail. There will be more shopping on the horizon. The objective is to build the company's vaccine, biotechnology and non-prescription-medicine businesses, as well as expand in emerging markets.

A team from Sanofi, which had US$42 billion in revenues last year, visited India recently and held talks with Mumbai-based Piramal Healthcare and the privately held, Bangalore-based Micro Labs. GlaxoSmithKline (GSK), which had US$45 billion in revenues, is widely reported to be looking to acquire a 5% stake in Dr. Reddy's Laboratories; it already has a marketing deal in place. Pfizer, meanwhile, has struck alliances with Aurobindo Pharma and Claris Lifesciences. A lot of other proposals of the same kind are floating around, some of which involve second-tier companies, including Torrent Pharmaceuticals, Unichem Laboratories, Shasun Chemicals and Orchid Chemicals & Pharmaceuticals. The promoter families of quite a few Indian drug companies are open to the idea of selling to a multinational company but are waiting for valuations to improve. Some of the big deals being spoken about haven't gone through because of valuations.

Four Important Trends

Why has Indian pharma come under the takeover lens? Four important global trends are driving MNCs' strategies:

First is cost optimization, for which you need to create a flexible business model.

The second is getting into businesses that are different -- vaccines, for instance.

The third is the pursuit of profitable growth, for which you need to focus on emerging markets, which give you good margins.

Finally there is the move into generics, for which many companies have to look at inorganic growth."With growth expected to taper off in the U.S. and other developed countries, emerging economies like India are expected to drive future expansion. The Indian pharmaceutical market had estimated revenues of US$17 billion in fiscal 2008. The domestic formulation business, which was US$8 billion, is estimated to grow at over 12% annually to reach US$14 billion by fiscal 2013.

The key growth drivers in the domestic market, are increasing per-capita income, growing insurance penetration, better health awareness, higher government expenditure, adherence to IPR (intellectual property rights) norms, and shifts in disease profiles. Also, the country has established itself as a leading player in generics manufacturing as well as contract research and manufacturing. This is of interest to MNCs, which are currently facing a relatively low pipeline of new innovator drugs. Increased pressure from governments in several developed countries to reduce health care costs has also forced large pharma companies to look at enhancing their generics portfolio.

Getting access to India's domestic market and adding generics to portfolios are two primary drivers behind the increasing number of takeovers by MNCs in the pharma sector. Until recently, India was not an important market for big pharma companies because it accounted for only a very small percentage of their global revenues. But over the next 10 years, India is expected to become a multibillion-dollar market, among the top 10 markets globally. Indeed, Consumer spending on health care in India increased from 4% of gross domestic product in 1995 to 7% in 2007, and is expected to rise to 13% by 2015. However, tapping the Indian market will require a tailored approach. Cost efficiencies are important, price points are important. There are lots of poor people and different disease profiles.

On the generic front, earlier, generics used to be the lower end of the game, the bottom of the barrel. But those days have changed. Now there is a big drive for generic substitution wherever possible, because the prices collapse by 90%. All the big pharma players want to take a bigger role in generics. They realize that having generics in their portfolio gives them an extra arrow in the quiver while dealing with policymakers globally. One way is to acquire Indian drug-makers that have proven skills in manufacturing can keep their operations lean and have cost-effective generic development methods.

Expansion by global pharma companies into emerging markets like India becomes imperative as about US$103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of such companies. Thus they are trying to augment their revenues by acquiring or aligning with companies in the generics business. The acquisition of Ranbaxy is an apt example in this context.

The industry itself isn't necessarily looking to sell out. The Indian Pharmaceutical Alliance, a lobby of 12 top home-grown drug-makers, was seeking the government's help to prevent acquisitions by foreign companies, through funding to protect and promote the industry and through tackling such issues as patents and price controls.

A Fragmented, Vulnerable Market

The Indian market is vulnerable because it is fragmented. At the end of 2008, according to pharma research firm ORG IMS, the top five companies had a combined market share of only 22%. Cipla Ltd. had the largest, having ousted Ranbaxy from the top spot, yet its share was only 5.3%. The top 20 companies had a total market share of about 57%. Globally, the 10 largest companies account for about 40% of sales.

According to Espicom Business Intelligence, India is the world's fourth-largest producer of pharmaceuticals by volume, accounting for around 8% of global production. In value terms, India's production accounts for around 1.5% of the world total, ranking India thirteenth. While there are around 270 large R&D-based pharmaceutical companies in India, including multinationals, government-owned and private companies, there are also around 5,600 smaller licensed generics manufacturers, although in reality only around 3,000 companies are involved in pharmaceutical production. Most small firms do not have their own production facilities, but operate using the spare capacity of other drug manufacturers. That is the fragmented market of pharmaceuticals in India.

The intense competition in a highly fragmented market is posing a great challenge. The stage is set for the next phase of growth accompanied by consolidation. India is one of the most competitive markets in the world, primarily because it is very fragmented. No one enjoys dominance and that is unlikely to change in the near future.

Cost considerations are also driving MNCs' interest. India offers the benefits of low-cost R&D, a domain in which it is estimated to capture a 10% to 20% share of the world's business by 2020 from less than 1% currently. Globally, pharmaceutical companies are shifting their outsourcing activities to Asian markets, with India emerging as one of the most attractive destinations, according to an August 2009 report by the Organization of Pharmaceutical Producers of India (OPPI) and Ernst & Young (E&Y). India is a fast-growing custom manufacturing outsourcing destination with a growth rate of 43% that is three times the global market rate. This is driven by its ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities.

The report rated India highest in terms of cost-efficiency attractiveness among six destinations including China, Eastern Europe, Puerto Rico, Singapore and Ireland. India's cost efficiency is driven by its low manufacturing cost, which is only 35% to 40% of the cost of manufacturing in the United States, supported by its low installation and manpower cost. In drug discovery and development services, India is emerging as a hot spot, growing at around 65%. India offers significant cost arbitrage in end-to-end R&D with potential savings of 61% as compared to the United States.

Another E&Y study, developed with the Federation of Indian Chambers of Commerce and Industry (FICCI), says India enjoys significant cost arbitrage in the conduct of clinical trials, which includes infrastructure, patient recruitment, manpower, data management and processing costs. "The cost of these activities in India is typically 40% to 60% lower than in developed countries and around 10% to 20% lower than in other emerging economies," says the study. At least eight of the top 10 pharma companies internationally are tapping such allied services in India. The sector is growing by 21% annually in India, compared with 7.5% globally.

A Growing Affluent Market

MNCs have another reason to eye India. The FICCI-E&Y study says that high-value drugs from MNCs could produce up to US$8 billion in sales by 2015. The population in India's highest income class is expected to grow to 25 million in 2015 from 10 million today, so more people will be able to afford high-value patented drugs. MNCs are increasingly restructuring their operations with global parents increasing their equity stakes in their Indian affiliates. Companies such as Bristol-Myers Squibb and Merck that had exited the Indian market have staged a reentry. Lifestyle disorders will make people more vulnerable to ailments such as cardiovascular diseases and diabetes. Secondly, medicines will become more affordable to a larger number of people as the size of India's 300 million middle class is rapidly increasing and income levels are also going up.

But the entry of MNCs does not necessarily mean more expensive medicines. It could lead to the introduction of patented drugs for lifestyle diseases. But India will continue to need affordable medicines, particularly for acute ailments. These are typically served by generic medicines which are affordable and, in certain cases, their prices are regulated by the government. While we can expect patented medicines to be launched in India, particularly due to growing confidence in Indian IPR laws, affordable generic medicines will continue to comprise a very significant section of the market.

Pharma takeovers elicit so much attention because health care is of key importance everywhere. Health care and pharmaceuticals will continue to be of strategic interest for the country. The pharmaceutical industry will continue to be watched and followed keenly by the media as well as the government, unlike several other sectors. That is why industries such as advertising and market research have become almost 100% foreign-owned without a murmur, while pharma takeovers have a host of critics.

The criticisms notwithstanding, MNCs obviously are attracted to India. From the Indian point of view, it makes sense to join hands or sell out. Intense competition is one reason. A patent regime established in 2005 that limits the industry's ability to introduce new generic drugs is another. With the increasing need for capital to sustain momentum, a number of Indian pharmaceutical companies will find it difficult to pursue the growth path on their own. Such companies will be ideal candidates to join hands with strong multinational companies.

Indian companies face other problems, too. Exports, mainly of generics, have become an increasingly important business component. But some Western countries are setting up what are perceived as non-tariff barriers. For example, the U.S. Food & Drug Administration has taken action against several companies; early this year, it banned 28 of Ranbaxy's drugs, saying the company had falsified data and test results in approved and pending drug applications. Also, several shipments of generic drugs destined for Latin American countries have been seized in European ports. A Dr. Reddy's consignment of losartan, used to lower blood pressure, was seized in transit to Brazil by Dutch customs officials. The U.S. multinational DuPont holds the patent for losartan in the Netherlands. Several such seizures have occurred that the Indian industry considers illegal because the drugs were in transit and not meant for sale in any European market.

Indian Pharma 'At a Crossroads'

Indian companies are at a crossroads. Because of the increasing competition, winning in commodity generics in developed markets will be difficult. Today, valuations are fantastic. So divest. If you do not divest, you have to invest. But for that you need resources. Ranbaxy and Shantha got very rich valuations, some three to five times sales.

The "rich" valuations raise a different issue: Are MNCs paying too much? Consider what happened to Daiichi after the Ranbaxy purchase. At the time of the acquisition, a leading business magazine wrote in its headline "Japan's Daiichi Sankyo makes Ranbaxy Laboratories an offer it can't refuse." The Singh brothers, Malvinder and Shivinder, sold their 34% stake to the Japanese major for US$2 billion. Daiichi paid a similar sum in an open offer to ordinary shareholders; it now owns 63.9% of the company. At the end of the year, the Japanese company was licking its wounds. It had to write down US$3.84 billion after Ranbaxy shares plunged 66% on the Bombay bourses, in line with the rest of the market. Four years of Daiichi's profits were wiped out. That doesn't seem to have fazed others. Japan's largest and oldest pharma giant, Takeda Pharmaceutical, is keenly eyeing Ahmedabad-based Torrent Pharmaceuticals as a possible acquisition.

Takeda and Daiichi are looking to the future. When the Indian pharma industry itself looks to the future, what does it see? Just a few years ago, Indian companies seemed to be on the takeover trail. The roles have now reversed in the Indian pharma M&A space. In the growth years of 2005 to 2008, companies like Wockhardt, Dr. Reddy's and Ranbaxy were busy shopping abroad to expand their global footprint. In 2007-08 alone, Indian drug companies made 14 acquisitions abroad at a cost of US$1.3 billion. Some deals have gone wrong. Wockhardt is selling off because it borrowed too much to fund acquisitions and ended up with financial problems. Sun Pharma is still fighting a legal battle over its bid for Taro of Israel. The experiences of some others -- Dr. Reddy's with Betapharm of Germany for one -- have not turned out well: The Company has had to write off around US$300 million on account of this German subsidiary.

Is it the end of the Indian pharma MNC? Indian generic MNCs will come up. Sun Pharma is trying. So is Dr. Reddy's. They could become generic MNCs. Companies that have ambitions are not going to give up. This is just a pause.

Types of Mutual Fund.

Open-Ended Funds, Close-Ended Funds and Interval Funds

Open-ended funds:

are open for investors to enter or exit at any time, even after the NFO. When existing investors buy additional units or new investors buy units of the open ended scheme, it is called a sale transaction. It happens at a sale price, which is equal to the NAV. When investors choose to return any of their units to the scheme and get back their equivalent value, it is called a re-purchase transaction. This happens at a re purchase price that is linked to the NAV. Although some unit-holders may exit from the scheme, wholly or partly, the scheme continues operations with the remaining investors. The scheme does not have any kind of time frame in which it is to be closed. The ongoing entry and exit of investors implies that the unit capital in an open-ended fund would keep changing on a regular basis.

Close-ended funds

have a fixed maturity. Investors can buy units of a close-ended scheme, from the fund, only during its NFO. The fund makes arrangements for the units to be traded, post-NFO in a stock exchange. This is done through a listing of the scheme in a stock exchange. Such listing is compulsory for close-ended schemes. Therefore, after the NFO, investors who want to buy Units will have to find a seller for those units in the stock exchange. Similarly, investors who want to sell Units will have to find a buyer for those units in the stock exchange. Since post- NFO, sale and purchase of units happen to or from a counter-party in the stock exchange – and not to or from the mutual fund – the unit capital of the scheme remains stable.

Interval funds

combine features of both open-ended and closeended schemes. They are largely close-ended, but become openended at pre-specified intervals. For instance, an interval scheme might become open-ended between January 1 to 15, and July 1 to 15, each year. The benefit for investors is that, unlike in a purely close-ended scheme, they are not completely dependent on the stock exchange to be able to buy or sell units of the interval fund.

Actively Managed Funds and Passive Funds

Actively managed funds :

The funds where the fund manager has the flexibility to choose the investment portfolio, within the broad parameters of the investment objective of the scheme. Since this increases the role of the fund manager, the expenses for running the fund turn out to be higher. Investors expect actively managed funds to perform better than the market.

Passive funds:

The invest on the basis of a specified index, whose performance it seeks to track. Thus, a passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex. The proportion of each share in the scheme’s portfolio would also be the same as the weightage assigned to the share in the computation of the BSE Sensex. Thus, the performance of these funds tends to mirror the concerned index. They are not designed to perform better than the market. Such schemes are also called index schemes. Since the portfolio is determined by the index itself, the fund manager has no role in deciding on investments. Therefore, these schemes have low running costs.

Debt, Equity and Hybrid Funds

A scheme might have an investment objective to invest largely in equity shares and equity-related investments like convertible debentures. Such schemes are called equity schemes. Schemes with an investment objective that limits them to investments in debt securities like Treasury Bills, Government Securities, Bonds and Debentures are called debt funds.

Hybrid funds :

It has an investment charter that provides for a reasonable level of investment in both debt and equity

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NIFTY 50 IN LAST 20 TEAR: ONE OF THE GREATEST WEALTH CREATER

Equity is the one of the most exotic asset class, it has given about 21% average annualized return since 1990, investment in equity has seen sea change in recent decade. Emergence of business channel sprayed the awareness about equity among the investor community ,earlier to buy equity was not so easy as it is now, today market is in pockets of investor in terms of access, technology has provided the multiple way to access the market through internet, through cell phone and WAP , now a day’s various expert advices trading and investment tips are available with the investors, Many fund house are running their mutual fund and giving good return to their investors and the asset under management of mutual fund industry is approximately $ 6.7 lakh billion. Reliance capital is the largest mutual fund whose asset under management is more than one lacks crore followed by HDFC MF, ICICI Prudential MF, state run UTI Mutual Fund whose asset under management is 68,000 crore and Birla Sun Life MF are the five largest fund house of the country. Insurance companies, HNI, FII, Retail investors are holding significant amount of equities in their portfolio, although the allocation in equity is less than 5% of the total house hold saving in the country however in totality it is a huge amount. In recent market selloff where FII has sold 13.1billion US$ at one way and DII has bought more than 16.2 US$ at the same time in other way.

Identification of investable share is the tuff job even for the market participant and timing the market is even tougher for the expert, but the fundamental analysis and technical analysis helps the people to identify the cheap stocks at the right time to park their investments. But still the question remain same what and how much one should buy? The main barometer which is index it gives the diversity and credibility of the basket and also liquid to exit and enter at desired time for the investor

NIFTY 50 stocks reflects the appropriate behavior of equity because this is the broader index composed of 50 blue chips Company of various sector having better corporate governance, credibility and profitability. Nifty is claimed as the stocks of the nation gives the diversity and reliability .Reshuffling in script is also an important phenomena because we have observed that time to time the company who hasn’t followed the corporate governance and not adequately performed have shown exit way from the index, similar incident happened with the Satyam computers after the scam broke out in the company the script of the company removed from the index and replaced by other company. The most important characteristics of NIFTY is the diversity it is the basket of the shares who represents the various sectors like Reliance and ONGC represents the petrochemical sector, NTPC represents the power sector, ACC represents the cement sector ,Infosys represent the IT sector and SBI and ICICI bank represents the banking sectors and so on.

The stocks in NIFTY gets proportionate weight age according to their market capitalization so if money will allocated to the company who are the component of index according to their proportion, then the capital appreciation will be similar as the index fluctuation.

YEAR	OPEN*	CLOSE	GAIN PT.	%
1990*	279	372	93	33.33333
1991	318	558	240	75.4717
1992	737	761	24	3.256445
1993	744	1042	298	40.05376
1994	1083	1182	99	9.141274
1995	1182	908	-274	-23.181
1996	908	899	-9	-0.99119
1997	939	1079	140	14.90948
1998	1081	884	-197	-18.2239
1999	890	1480	590	66.29213
2000	1592	1263	-329	-20.6658
2001	1254	1059	-195	-15.5502
2002	1055	1093	38	3.601896
2003	1100	1879	779	70.81818
2004	1912	2080	168	8.786611
2005	2115	2836	721	34.08983
2006	2835	3966	1131	39.89418
2007	4137	6130	1993	48.17501
2008	6144	2959	-3185	-51.8392
2009*	3033	4300	1267	41.77382
TOIAL	279	4300	4021	1441.219
HIGH	279	6200	5921	2122.222
LOW	279	2242	1963	703.5842

Table1: Analysis of equity data since 1990

Above table depicts the twenty year equity behavior in Indian context the index was quoting at 279 at July 1990 and when it peaked out in January 2008 it was quoting on whooping above 6200 which was 2122.22 % from the 1990 level .The appreciation is excluding the dividend payouts from the holding of the share for such a long time. The gain has outperformed all the asset class around.

However market corrected in between, time to time but they recovered their losses in coming year. In the above calendar 1991 was the best month in terms of return the year has given 75.47% of annualized return to the Nifty followed by 70% in 2004 and 60% in 1999.since 1991, 14 years has given positive return while 6 years has given negative return among them 2008 has given -51% followed by -23.18% in 1995.

Fig: graphical presentation of nifty movement on monthly closing basis

*data for year (1990 July onwards, 2009 up to June first week)

** Nifty touched 4600 at 5^th June 2009 at the intraday basis.

Several events have been priced by the market since 1990. earlier Indian capital market was in nascent stage and the market infrastructure were poor, it was operating under very low base and volume, there was the manual trading system in practice, settlements were in physical form and time taking activity, the unlawful practices were quite common with the Indian market. After the new economic policy opted by Rao Manmohan duo the market has seen a revolutionary change in their all dynamics. The participation of investors has increased after the reform, system became more regulated after the formation of SEBI, FII became the dominant player in the market, retail and HNI also became active in on the bourses, household saving started trickling in the equity market through mutual fund and direct investment. These events bring new confidence and improved the sentiments in Indian capital market.

In Indian condition equity sparked fear in the minds of investor. In India people in generally love to see their investment on regular basis. The fluctuation in the market is mostly hyped by the media channel that’s why people feel themselves scary about to investment in the market. In spite of that the equity has given best return in the longer horizon most of the household saving finds their way towards fixed income instruments because liquidity concerns and conservative attitude of the people. Investment psychology plays very important role to park the saving in the equity, and second most important thing is risk aversion or risk apatite.

The advent of business channel has created a revolution in the investment world people getting aware about the fundamental and technical’s of the markets and behaving accordingly.

The financial reforms taken by the government open another gate for money to the capital market and treasury operation if corporate emergence of HNI and retail investor in the big way played significant role in the lustrous performance of capital market in India.

Today Indian market has their own legs and wings although they are more dependent on foreign flow but as the time is running out the dependency is getting lesser .In the recent downturn in equity market in 2008 the FII has sold more than 13billion US$ and in the same period more than 16 billion US$ of domestic money get the way in the market .Indian equity market has slowly and slowly showing sense of stability in their behavior.

1990:

At the first trading day of July NIFTY was quoting at 279 and by December end it climbed 75 points which was 25.25% up from July level. It was a politically unstable period the unstable economic policy by the previous government of Janta Dal and latter on Samajwadi party headed by Chandrasekhar previously India was under tremendous pressure of Balance of Payment crisis this was the period when previous government kept their gold reserve to IMF to get foreign exchange for their short term requirements in 1989.

This was the phase when market was poorly regulated only few people were able to invest in the market because of the technical constrains. Manipulation frauds were the flavor of the market in that period.

1991:

Year 1991 was the greatest year in the terms of equity market return it was fueled by the economic reform and liberal policy opted by the Rao government in the centre .Market was seen greater participation from the investor and DII .and given whooping gain of more than 75%in a year the first half was given 22% return while last half given 41%of return.

The market has seen new ray of hope in the form of reform and performed accordingly this was the pivotal period for the equity market in the India from here the market never looked back.

1992:

Market started with optimism in first quarter and given the return of 120%, however in later month market cooled off and closed its shutter for the year at 33% of gain but this gain was very important because it came after great 75% run in 1991.this was the tome when FII activity started strengthening in the country. Political stability and optimism of growth was priced by the market that’s why market showed follow rally after record year.

Indian economy reflected the ray of hope in this period and this was engineered by the Rao –Manmohan policy

1993:

Year 1993 was also started on good notes. Historical serial bomblast of 12^th march 1993 shocked the market and on reaction of it market corrected 19%in two month i.e. March and April. The green year for the market here it has given 40% annual return, it was great time for Indian economy because Manmohan singh policy was converted into the performance by that time and the country and the corporate India was in growth track .There was some profit booking seen in the first two quarter but Nifty came back strongly in next quarter with significance gain.

1994:

1994 was the year of consolidation after three great years of Bull Run for the market. Main outcome of the year was the market able to hold their green flag with 9%gain in the year .in spite of global problems and geopolitical concerns market consolidated their gains in this year.

1995:

After the four year of Bull Run market corrected in this year due to political uncertainty in Delhi and poor monsoon given the market an excuse for profit taking and it corrected 23% in the year. This was the real breather for the market after for year of strong Bull Run.

1996:

Year started with the cautious note and remained under narrow range in whole year market closed mere 0.99% down although first half market gone up 23% while final half of the year surrendered 18%of their gain which was backed by non event year.

1997:

This year was given return of 14% but alternate band of buying and selling were seen on the screen ,FII flow were sustained followed by better global picture .Positive budget and growth familiar budget supported the market gain

1998:

Looming global instability and credit crisis in Asian economy open the selloff in market. NATO intervention on Yugoslavia Middle East crisis of Israel and Palestine dampened the sentiments of the markets and market corrected 18%in the year.

The subdued interest if FII and cooling of economic activity in the region pull backed the market this year.

1999:

This was the third best year of the Indian capital market with 66%gain in the year the flavor of NDA government led by Atal Bihari Bajpayee was backed by the market participant and plenty of optimism created euphoria in the market.

Political stability in the centre and new reforms by the government bring the positive sentiments in the market

2000:

Gloomy global economy and poor monsoon given the proper reason to selling in equity market .political instability in the Delhi was another reason that created selloff in the equity markets. This year market corrected 20% in the year. Ketan Parikh incident was created panic in the market in November.

2001:

Global jitter especially Asian crises, geopolitical condition in Middle East created global selloff in the equity markets and India corrected 15%in the year with global peers.

Japanese economy and problem in the Japanese financial system spread wave of selling in the equity market in the Asia region.

Domestically poor agriculture growth and bad corporate earning added more flavor in the bad sentiments and market further cooled

2002:

After the subdued year Indian capital market was mixed in 2002 here alternate bouts of rise and fall were registered on the screen. Political uncertainty also added the sentiment and market finally able to registered 3.6% gain in the year and made a good base for further move which was never imagined that Indian capital market going to surprise every analyst in coming year.

2003:

This was the phenomenal year for equity market Nifty given 70% return in year among them 66% came in second half of the year. Again market was celebrating the election year.

Economy was growing at the rate of more than 8% one of the highest among the growing nations. The corporate earnings were phenomenal. So market given thumbs up and registered second highest gain in the history.

First half of the year was given only 3%of return but in second half it was given 66% return.

2004:

Surprise result of Loak Sabha election and strong performance of left parties spread the negative sentiments in the market.

After the sustain rise market corrected in first half in first quarter 7% second quarter17% and third quarter13% however fourth quarter was the recovery backed by the some policy action of P.Chidambaram and Manmohan Singh. The quarter given 17% of northward movement and annual basis market ended positive with 8%gain.

2005:

India became the destination of the overseas money yen carry trade created the opportunity for the Japanese money to trickle in Indian bourses .and this effect was visible with the 34%annual return in the market.

In spite of the fact that left parties supporting the government they forwarded banking reform infrastructure spending and a budget that liked by India INC

2006:

Chidambaram effect was still there on Dalal street .Index were making new high and it was the liquidity driven rally.

Growing economy better corporate number reflected at the screen of the market and market has given 39% return in the year.FII were the key contributor in the market they were parking their money in BRIC country .hedge fund became more active in this year .they were putting their money through the participatory notes. Which were issued by FII?

2007:

Year 2007 was the green carpet for the markets with whooping 48% rally in the market backed by record FII flow of 17 billion US$ in a single calendar year and significant amount of retail participation in the market. The best month was the October with the 16% return while worst month was the February with 9% negative return. The sentiments were quite positive in this year record number of companies came with their IPO and they were successful to tap the market.

By this time India became one of the prime destination of investment, many India dedicated fund were started operating from overseas, tax treaty done with Singapore also supported the equity market, good amount of Japanese money came in the market and market rallied on the liquidity.

The GDP growth was at record level of 9.2 and India were about to achieve the double digit growth.

2008:

The year 2008 was the worst year and one of the most eventful year of the equity market not only in India but globally, the ghost of subprime spread their wing across the globe, credit crisis was the flavor of the season .This event pulled down the equity market globally, equity markets all around the globe corrected more than 60% taking the global link ,Indian market has also corrected record 51% in the year .The investors money significantly eroded in the crash .In the entire calendar year only July and December was the month that has given the positive return and rest of the months ended into the red.

Growing crude price, inflation and credit crisis was the flavor of the season

2009:

The year started on the subdued notes however post march market surprise the investor with their northward journey FII pumped significant money in the market and market gained 41% by June election result created great euphoria in the market and in the history of Indian capital market. Indices had hit the 20% circuit on Monday, May 18, after the UPA (United Progressive Alliance) swept the Lok Sabha polls. This was the repeat of the history .The day's percentage rise was the biggest since a 20.8 percent jump on March 2, 1992 when Singh, who was then finance minister, unveiled reforms that opened the economy to foreigners .This was the pivotal event for the market where same person voted by Indian people to govern in for next five year freely and also saw the government unveiling the list of Cabinet Ministers.

The exile of left party from the decision making process was also celebrated by the market.

Fig: percentage fluctuation of Nifty

Investment of 1000 per year in NIFTY given the return in fillowing way.

Equity		Year*
1000		1st year
2333.333		2nd year
5094.34		3rd year
6260.234		4th year
9767.693		5th year
11660.58		6th year
9957.539		7th year
10858.84		8th year
13477.84		9th year
12021.65		10th year
20991.07		11th year
17653.09		12th year
15907.99		13th year
17445.09		14th year
30141.26		15th year
33698.15		16th year
45839.11		17th year
64718.22		18th year
97478.29		19th year
48545.23		20th year
82320.5		21st year

Fig: return from nifty after annual investment of 1000 per year.

If an investor would have invested 1000 rupee every year since 1989 his investment would have swells to 97478 in 18^th year as per market growth this gain was more than four time than of investments and after the massive correction of 51%in 2008 still the investment was 48545 after investing 20000 in the market.

Shorter term there is always a risk in the market because equity is known for their sharp move however the longer term investment in equity has great potential to give the better return and as we know Indian markets are maturing day by day so there are still a great opportunity in investing the equity so equity is going to the biggest asset creator in times to come.