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India's capital markets
February 14, 2007

Unlocking the door to future growth
India’s capital markets have experienced sweeping changes since the beginning of the last decade. Its market infrastructure has advanced while

India Special

corporate governance has progressed faster than in many other emerging market economies. But in contrast to several developed countries and Asian economies, India’s capital markets are still shallow, implying that further reforms are needed to make India a world-class financial centre.
At nearly 40% of GDP, the size of India’s government bond segment is comparable to many other emerging market economies. Its corporate

bond market, however, remains small and is dwarfed by those of the United States, South Korea and Malaysia.
India boasts a dynamic equity market. The sharp rise in India’s stock

markets since 2003 reflects its improving macroeconomic fundamentals. However, the large size of insider holdings and the small presence of institutional investors belie these impressive figures.
Innovative products such as securitised debt and fund products based on alternative assets are starting to break ground. But an enabling

environment is not yet in place and there remains an overriding need to increase domestic investors’ knowledge regarding the merits and risks of capital market investing.
A vibrant, well-developed capital market has been shown to facilitate investment and economic growth. We believe that persistent reforms in the

sector can support India’s already impressive growth trend in the coming years. Financial deepening beckons in India
Stock and bond market capitalisation (end-2005), % of GDP Author Jennifer Asuncion-Mund +49 69 910-31714 jennifer.mund@db.com Editor Maria L. Lanzeni Technical Assistant Bettina Giesel Deutsche Bank Research Frankfurt am Main Germany Internet: www.dbresearch.com E-mail: marketing.dbr@db.com Fax: +49 69 910-31877 Managing Director Norbert Walter China...