WELCOME

Slide 1: WELCOME TOPRESENTATIONONSTATE OF INDIAN CAPITAL MARKET

by. G .N. Bajpai Former - Chairman SECURITIES & EXCHANGE BOARD OF INDIA & LIFE INSURANCE CORPORATION OF INDIA On 14th OCTOBER �2005 At US � IVCA Palo � Alto, LA

Slide 2:STRUCTURE OF PRESENTATON

State of the Market Drivers Economic Factors Macro Global Micro Market Efficiency Regulators Philosophy Perspective Prescriptive Potential

Slide 3:STATE OF MARKET

Market Performance Ratios Volume Number of trades Amount Market Capitalization FII Investment

Slide 4:MARKET PERFORMANCE

Slide 5:MARKET PERFORMANCE

Slide 6:RATIOS

Slide 7:NUMBER OF TRANSACTIONS A COMPARISON

Slide 8:STOCK INDEX FUTURES

Slide 9:SINGLE STOCK FUTURES

Slide 10:CAPITAL MARKET

Slide 11:EQUITY

Slide 12:DEBT

Slide 13:DEBT

Slide 14:FII INVESTMENT IN INDIA

Simple and speedy registration process Minimum registration formalities 792 FIIs registered as on 30.09.2005 2139 sub accounts registered as on 30.09.2005 Cumulative FII Investment- US$ 38.96 bn.

Slide 16:FII INVESTMENT

Slide 17:FII- COUNTRY OF ORIGIN

Slide 18:FII INVESTMENT

Slide 19:FII INVESTMENT IN INDIA

One of top growing economy�GDP growth rate of over 6% in last decade India among top 3 Asian investment destinations in �The 2005 World Investment Report� - UNCTAD Foreign portfolio investment of more than US $ 8 billion in the Years 2005 One of the best performing among emerging stock markets, in recent times

Slide 20:ECONOMIC FACTORS

Macro GDP growth Savings growth Interest rates Financial Stability Geo � political Growing Demand Global - Liquidity - Demand led growth

Slide 21:GDP GROWTH

Slide 22:GDP GROWTH

Slide 23:SAVINGS GROWTH

Slide 24:LIFE INSURANCE

Slide 25:LIFE INSURANCE

Slide 26:NON- LIFE INSURANCE

Slide 27:NON- LIFE INSURANCE

Slide 28:BANKING

Slide 29:BANKING ( Cont)

Slide 30:FINANCIAL STABILITY

Slide 31:FOREX RESERVE

Slide 32:ECONOMIC FACTORS

Micro Firms Profitability Cost of Capital Productivity enhancement Competitive edge Dismantling of Administered rate investment instruments

Slide 33:MARKET EFFICIENCY

METAMORPHOSED MARKET

Slide 34:METAMORPHOSED MARKET

Slide 35:MARKET STRUCTURE (JULY 31, 2005)

22 Stock Exchanges, 15 Subsidiaries Over 10000 Electronic Terminals at over 400 locations all over India. 9108 Stock Brokers and 14582 Sub brokers 9644 Listed Companies 2 Depositories and 483 Depository Participants 128 Merchant Bankers, 59 Underwriters 34 Debenture Trustees, 96 Portfolio Managers 83 Registrars & Transfer Agents, 59 Bankers to Issue 4 Credit Rating Agencies

Slide 36:MARKET STRUCTURE (AUGUST 31, 2004)

Venture Capital Funds 21 Foreign 61 Domestic 38 Mutual Funds And 479 Schemes Asset Base: US $ 44.94 bn. 739 Foreign institutional investors Cumulative FII investment - US$ 36.76 bn

Slide 37:METAMORPHOSED MARKET

Slide 38:STOCK INDEX FUTURES

Slide 39:SINGLE STOCK FUTURES

Slide 40:Quote from the Economic Survey 2003-04 Government of India

� The securities markets have made enormous progress in recent years. India�s equity market is now being increasingly recognized as a success story on the world scale�

Slide 41:METAMORPHOSED MARKET

Slide 42:INDIAN DISCLOSURE STANDARDS

Initial and Continuous Disclosures norms of global standards � India scores 100% as far as disclosure standards are concerned � (What works in Securities Laws?: Rafael La Porta, Florencio Lopez- de-Silanes, Andrei Shleifer. www.nber.org/papers/w9882)

Slide 43:INDIAN ACCOUNTING STANDARDS

Indian Accounting Standards: �Principle� based. Aligned to International Accounting Standards. �In terms of consolidation, segmental reporting, deferred tax accounting and related party transactions, the gap between Indian and US GAAP is minimal.� (CLSA - CG Watch; September 2004)

Slide 44:INDIAN ACCOUNTING STANDARDS

Indian Accounting Standards � �Principle� based. Aligned to International Accounting Standards. Indian Accounting Standards score a maximum of 3 according to CALPERS� Permissible Equity Market Analysis (Disclosure Quality and Emerging Market Mutual Fund Investment: Reena Aggarwal, Leora Klapper, Peter D. Wysocki http://www.worldbank.org/research/bios/lklapper/mutual%20funds_AKW.pdf)

Slide 45:Quote from The Economic Intelligence Unit 2003 Study :  Asian experience

�Top of the Country class, as might be expected is Singapore followed by Hong Kong and, somewhat surprisingly, India where overall disclosure standards have improved dramatically, accounting differences between local and US standards have been minimized and the number of companies with a majority of independent directors has risen significantly.�

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�India�s stock market regulatory authority, the Securities and Exchange Board of India (SEBI) continues to raise the bar for good corporate governance.�

Slide 48:METAMORPHOSED MARKET

Slide 49:METAMORPHOSED MARKET

Slide 50:CLEARING SYSTEM

CENTRAL COUNTERPARTY clears all trades, determines obligations of members, arranges for pay-in of funds/securities, receives funds/ securities, arranges for pay-out of funds/ securities to members, guarantees settlement, and collects and maintains margins

Slide 51:METAMORPHOSED MARKET

Indian Settlement System conforms to: CPSS-IOSCO Principles & G-30 Recommendations

Slide 52:T+2 SETTLEMENT SYSTEM

Slide 53:METAMORPHOSED MARKET

Slide 54:DYNAMIC RISK MANAGEMENT SYSTEM

Capital adequacy norms Trading and Exposure limits Margin requirements VaR based margins Mark-to-Market margin Index-based market-wide Circuit breakers Settlement guarantee fund On-line position monitoring Automatic disablement of Brokers� terminal

Slide 55:Quote from Financial Times

�World�s biggest democracy can show Google how to conduct an online IPO� �.in India you cannot apply on the web but investors can access one of the world�s largest financial networks with 7000 terminals scattered around 350 cities. And every step of the book building process is public. �The Indian system is a refreshing example of a transparent IPO market but it is also a rare one, especially in the insider-friendly Asian markets�

Slide 56:REGULATORY PHILOSOPHY

MANDATE

Slide 57:MANDATE

�PROTECT THE INTEREST OF INVESTORS IN SECURITIES AND TO PROMOTE THE DEVELOPMENT OF, AND TO REGULATE, THE SECURITIES MARKET AND FOR MATTERS CONNECTED THEREWITH OR INCIDENTAL THERETO� SEBI Act. EMERGENCE OF REGULATORY PHILOSOPHY Regulator�s focus should not be on the regulations but on the development of the Market. Regulations happen to be incidental to the developments.

Slide 58:PERSPECTIVE

PRESCRIPTIVE POTENTIAL

Slide 59:PRESCRIPTIVE

Market Depth Product Diversification Mortgage Backed Securities Assets Backed securities Warrants Vibrancy of Bond markets Co-ordination between trading platforms and OTC markets Disinvestment Market integration-convergence of Securities and Commodities markets Consolidation of regulation over listed companies Consolidated regulation over intermediaries Broadening market participation

Slide 60:PRESCRIPTIVE

Capacity Building�Regulator and Industry-pillars of scalability and quality of intermediation Balance between Costs of regulation and market development Co-operation with Regulators�cross border and cross jurisdiction-building common standards of regulations

Slide 61:POTENTIALS

Macro financial stability High Forex Reserve Low inflation Low interest rates High GDP Growth Projection Growing Prosperity Demand Disposable Incomes New breed Indian (global) entrepreneurs Indian Capital Market have the potential to deliver high rate of returns in medium to long duration.

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THANK YOU