Investors would like to forget 2008 – a year when the Sensitive Index shed more than half its value in 2008, its worst performance ever. But market experts say investors could look forward to some important changes in 2009. Here are some of them.
The sectors that could spark a rally
Insurance could be the big story in the new year, as some private insurance companies are expected to make their debut in the equity market. The other sector to watch out for is banking, which has been battered on the stock exchanges. Any recovery in banking stocks – something that is widely expected – will send a clear signal that the worst may be over.
Newer instruments to raise money
Raising money through traditional routes is becoming difficult. So companies will be looking at newer routes. At least six companies are exploring the option of issuing a combination of warrants with non-convertible debentures (NCDs) in the first quarter the calendar year itself. Citigroup Global Markets MD Ravi Kapoor says the new instrument will help companies to avail funds at a cheaper rate.
Earlier, warrants used to be issued through preferential allotment or public issues, but with the recent relaxation, companies will be able to reap benefits of both bonds and warrants simultaneously. FCCBs and fixed deposits will act as the maximum capital generating resources during the financial year 2009-10, he said.
Export of indices
The benchmark indices have become popular abroad, and NSE’s Nifty futures trading in Singapore is a perfect example of this. Some more products based on Indian stock indices are set to be launched on overseas exchanges. Apart from NSE’s Singapore futures, Exchange Traded Funds (ETFs) based on Nifty are traded on the London Stock Exchange, Lyxor, Borsa Italiana and Deutsche Borse.
The Sensex futures are listed on Chicago. In the coming months, expect the Sensex futures on Singapore exchange also. Nifty-based ETF may be launched on one of the US stock exchange as there is a great deal of interest for such a product. Interestingly, discussions are being held to launch a Nifty-based structured product in Israel.
Indian Depository Receipts (IDRs)
Global Depository Receipts and American Depository Receipts have become popular instruments for Indian companies to raise money overseas. Foreign companies have been allowed to raise money from India by issuing IDRs, the guidelines for which were issued three-four years. Though no company has come forward so far, there are indications that Standard Chartered may emerge as the first foreign entity to float an IDR issue.
Screen-based trading of MFs’ units
Sebi Chairman C B Bhave, who had set up the depository system, is expected to implement a system, whereby MF units can be traded on exchanges, or investments can be made through internet with an option to receive and make online payments.
This can save time and cost and the liquid schemes of mutual funds can be used like a bank account. The Association of Mutual Funds of India (AMFI) is already studying a proposal in this regard.
OTC products also on screens
With the emergence of technology, more and more screen-based products are being introduced. The next in queue is futures trading on interest rate. Interest rate futures are set to be launched in the early part of 2009.The success of currency futures will tempt regulators to introduce screen-based trading for over-the-counter market products such as currency forwards and overnight interest rate swaps.
More stock exchanges
The new year is expected to bring some competition to the Bombay Stock Exchange and the National Stock Exchange. At least two stock exchanges are expected to come up this year, depending on regulatory approval. The aspirants are Reliance Money and Financial Technologies.
Exchanges for SMEs
Small and medium enterprises find it difficult to get cheap access to capital. The problem may be resolved somewhat with the emergence of SME Exchanges. Three companies are now awaiting the market regulator’s approval for this.
Improved equity cult
The Securities and Exchange Board of India (Sebi) has appointed New Delhi-based economic think tank National council of Applied Economic Research (NCAER) to do a survey on the reasons for the low level of household investments in equity. Sebi is expected to take some concrete actions after NCAER submits its findings. another ambitious survey of Indian households is being done by Mumbai-based Centre for Monitoring Indian Economy (CMIE). This survey is expected to be out in the next couple of months and Indian households’ income, expenses, savings and investments trends will be known.
