Corporate Bond Market in India: Current Scope and Future Challenges

The capital market of an economy is considered to be well developed, only when a parallel development is ensured both in the equity and the debt segment. There is no doubt that the equity market in India is quite well developed and plays a crucial role in the growth of Indian economy. At the same time, Govt. debt market in India has also experienced a tremendous growth in the last decade. But unlike Govt. bonds, the corporate debt segment in India is still in the nascent stage and requires lot of initiatives to bring it to the Global standard. Bonds of different tenors issued by Central or State Governments and other PSUs capture more than 80 percent of the total debt market volume in India. Therefore, it has become very important to have a well run and liquid corporate bond market that can play a critical role in supporting economic development in India, both at the macroeconomic and microeconomic levels. Massive future growth in infrastructure, as required to achieve the higher GDP growth, can only be ensured through availability of long-term financing and also at a reasonable cost. Due to several issues, applicable to several market players, bank financing is not the right choice to meet all the financing needs to facilitate such growth. A well developed corporate bond market can be the optimal alternative, not only to support the financing requirement for infrastructural development, but also to relieve banks from all the problems of long-term financing, and spreading out the huge financing risk to a wider investor base to strengthen India’s bank-based financial system, to allow corporate borrowers to tap the low cost market, to enable investors including FIIs to earn fixed but higher returns, and above all to ensure overall growth of the economy. The present study analyze the existing structure of Indian corporate bond market, vis-à-vis the other developed markets, and attempted to explain the movements and changes taken place in Indian debt market during the last decade, may be as a result of several regulatory initiatives. The importance of an well developed corporate bond market for various groups of Indian financial sector, followed by the important factor contributing to the inferior growth of such market, supported by several facts and figures, are discussed in the study. It has been finally observed that, even if some changes have taken place to strengthen Indian corporate debt market, the market has a significant scope to contribute to the overall growth of Indian economy, but obviously subject to some very important and stringent initiatives from the Government and the concerned regulatory bodies

Commodity investments: opportunities for Indian institutional investors

An attempt has been made to establish the fact that by investing in commodities or it alternative channels, institutional investors like banks can not only compensate for the lower risk-free returns in their major chunk of investments in Government securities, but also will be able to diversify some amount of their portfolio risk which is expected to rise by taking exposure in commodity market. The results exhibited in all the tables and figures clearly depict that investment in alternative channels like commodity indices or commodity futures contracts in India will not only allow the institutional investors to leverage their portfolio return, but also will ensure that diversification benefits is achieved. Therefore, even if investment in direct commodities are restricted for Indian banks, but still there is a significant opportunity for them to invest in the available alternative channels like commodity indices or commodity futures contracts.Investment Portfolio, Commodity, Commodity Futures, Institutional Investors

Stock Market Integration and Volatility Spillover:India and its Major Asian Counterparts

Return and volatility spillover among Indian stock market with that of 12 other developed and emerging Asian countries over a period from November 1997 to April 2008 is studied. Daily opening and closing prices of all major equity indices from the sample countries are examined by applying the GARCH model [Engle (1982) and Bollerslev (1986)] to explore the possibility of stock market integration and volatility spillover among India and its major Asian counterparties. Apart from different degrees of correlations, both in terms of return and squared return series, among Indian stock market with that of other Asian countries, the contemporaneous intraday return spillover among India and almost all the sample countries are found to be positively significant and bi-directional. More specifically, Hong Kong, Korea, Singapore and Thailand are found to be the four Asian markets from where there is a significant flow of information in India. Similarly, among others, stock markets in Pakistan and Sri Lanka are found to be strongly influenced by movements in Indian market. Though most of the information gets transmitted among the markets without much delay, some amount of information still remains and can successfully transmit as soon as the market opens in the next day.Asian stock markets; Integration; Information spillover; GARCH model

Commodity investments: opportunities for Indian institutional investors

An attempt has been made to establish the fact that by investing in commodities or it alternative channels, institutional investors like banks can not only compensate for the lower risk-free returns in their major chunk of investments in Government securities, but also will be able to diversify some amount of their portfolio risk which is expected to rise by taking exposure in commodity market. The results exhibited in all the tables and figures clearly depict that investment in alternative channels like commodity indices or commodity futures contracts in India will not only allow the institutional investors to leverage their portfolio return, but also will ensure that diversification benefits is achieved. Therefore, even if investment in direct commodities are restricted for Indian banks, but still there is a significant opportunity for them to invest in the available alternative channels like commodity indices or commodity futures contracts

Commodity investments: opportunities for Indian institutional investors

An attempt has been made to establish the fact that by investing in commodities or it alternative channels, institutional investors like banks can not only compensate for the lower risk-free returns in their major chunk of investments in Government securities, but also will be able to diversify some amount of their portfolio risk which is expected to rise by taking exposure in commodity market. The results exhibited in all the tables and figures clearly depict that investment in alternative channels like commodity indices or commodity futures contracts in India will not only allow the institutional investors to leverage their portfolio return, but also will ensure that diversification benefits is achieved. Therefore, even if investment in direct commodities are restricted for Indian banks, but still there is a significant opportunity for them to invest in the available alternative channels like commodity indices or commodity futures contracts

Corporate Bond Market in India: Current Scope and Future Challenges

The capital market of an economy is considered to be well developed, only when a parallel development is ensured both in the equity and the debt segment. There is no doubt that the equity market in India is quite well developed and plays a crucial role in the growth of Indian economy. At the same time, Govt. debt market in India has also experienced a tremendous growth in the last decade. But unlike Govt. bonds, the corporate debt segment in India is still in the nascent stage and requires lot of initiatives to bring it to the Global standard. Bonds of different tenors issued by Central or State Governments and other PSUs capture more than 80 percent of the total debt market volume in India. Therefore, it has become very important to have a well run and liquid corporate bond market that can play a critical role in supporting economic development in India, both at the macroeconomic and microeconomic levels. Massive future growth in infrastructure, as required to achieve the higher GDP growth, can only be ensured through availability of long-term financing and also at a reasonable cost. Due to several issues, applicable to several market players, bank financing is not the right choice to meet all the financing needs to facilitate such growth. A well developed corporate bond market can be the optimal alternative, not only to support the financing requirement for infrastructural development, but also to relieve banks from all the problems of long-term financing, and spreading out the huge financing risk to a wider investor base to strengthen India’s bank-based financial system, to allow corporate borrowers to tap the low cost market, to enable investors including FIIs to earn fixed but higher returns, and above all to ensure overall growth of the economy. The present study analyze the existing structure of Indian corporate bond market, vis-à-vis the other developed markets, and attempted to explain the movements and changes taken place in Indian debt market during the last decade, may be as a result of several regulatory initiatives. The importance of an well developed corporate bond market for various groups of Indian financial sector, followed by the important factor contributing to the inferior growth of such market, supported by several facts and figures, are discussed in the study. It has been finally observed that, even if some changes have taken place to strengthen Indian corporate debt market, the market has a significant scope to contribute to the overall growth of Indian economy, but obviously subject to some very important and stringent initiatives from the Government and the concerned regulatory bodies

Impact of Futures Trading on Indian Agricultural Commodity Market

Besides the well-established fact towards the requirement of market based instrument, there is always been a doubt, as expressed by different bodies, on the usefulness and suitability of futures contract in developing the underlying agricultural commodity market, especially in agricultural based economy like India. Therefore, an attempt has been made to re-validate the impact of futures trading on agricultural commodity market in India. The daily price information in spot and futures markets, for a period of 7 years (2004 – 2010), for 9 major agricultural commodities, taken from different categories of Agri-products, are incorporated into various econometric models to test the concerned objective. Like most of the other studies undertaken on world and Indian commodity market, the present study have also exhibited that even though the inflationary pressure on commodity, especially agricultural commodity, prices have gone up sharply after the introduction of commodity futures contracts, the destabilizing effect of the futures contract is casual in nature and tends to vary over a long period of time. The empirical findings significantly shows that comparative advantage of futures market in disseminating information, leading to a significant price discovery and risk management, that can again help to successfully develop the underlying commodity market in India. Therefore instead of curbing the commodity futures market, it can always be suggested to strengthen the market structure to achieve the broader target

Impact of Futures Trading on Indian Agricultural Commodity Market

Besides the well-established fact towards the requirement of market based instrument, there is always been a doubt, as expressed by different bodies, on the usefulness and suitability of futures contract in developing the underlying agricultural commodity market, especially in agricultural based economy like India. Therefore, an attempt has been made to re-validate the impact of futures trading on agricultural commodity market in India. The daily price information in spot and futures markets, for a period of 7 years (2004 – 2010), for 9 major agricultural commodities, taken from different categories of Agri-products, are incorporated into various econometric models to test the concerned objective. Like most of the other studies undertaken on world and Indian commodity market, the present study have also exhibited that even though the inflationary pressure on commodity, especially agricultural commodity, prices have gone up sharply after the introduction of commodity futures contracts, the destabilizing effect of the futures contract is casual in nature and tends to vary over a long period of time. The empirical findings significantly shows that comparative advantage of futures market in disseminating information, leading to a significant price discovery and risk management, that can again help to successfully develop the underlying commodity market in India. Therefore instead of curbing the commodity futures market, it can always be suggested to strengthen the market structure to achieve the broader target

Stock Market Integration and Volatility Spillover:India and its Major Asian Counterparts

Return and volatility spillover among Indian stock market with that of 12 other developed and emerging Asian countries over a period from November 1997 to April 2008 is studied. Daily opening and closing prices of all major equity indices from the sample countries are examined by applying the GARCH model [Engle (1982) and Bollerslev (1986)] to explore the possibility of stock market integration and volatility spillover among India and its major Asian counterparties. Apart from different degrees of correlations, both in terms of return and squared return series, among Indian stock market with that of other Asian countries, the contemporaneous intraday return spillover among India and almost all the sample countries are found to be positively significant and bi-directional. More specifically, Hong Kong, Korea, Singapore and Thailand are found to be the four Asian markets from where there is a significant flow of information in India. Similarly, among others, stock markets in Pakistan and Sri Lanka are found to be strongly influenced by movements in Indian market. Though most of the information gets transmitted among the markets without much delay, some amount of information still remains and can successfully transmit as soon as the market opens in the next day