Equity market introduction and basics

1. Equity Markets II
An Introduction

2. Capital Formation
• Domestic Savings and Investments
• Savings = Income – Consumption

3. Factors affecting choice of investment:
• Returns
• Capital Appreciation
• Safety
• Risk Profile
• Liquidity
• Tax Benefits
• Duration

4. Ministry of Finance Year Ender 2023: Department
of Economic Affairs
• India continues to be one of the fastest-growing economies of the
world.
• The country's second quarter growth, 7.6 per cent, has been then
highest in the world and India's GDP growth for the April-June quarter
was 7.8 per cent.
• The Year 2023 is also significant as India hosted the G20 Presidency
from December 1, 2022 to November 30, 2023. The 43 Heads of
Delegations - the largest ever in G20 - participated in the final New
Delhi Summit in September 2023.

5. Following are some of the major achievements of
the Department of Economic Affairs, Ministry of
Finance, in 2023

6. • The Government has raised ₹16,000 crore, through issuance of
Sovereign Green Bonds in 2023 till date and these proceeds were
allocated to the eligible schemes/projects of the
Ministries/Departments such as New and Renewable Energy,
Environment, Forests and Climate Change, Housing and Urban Affairs,
Railways etc. In the FY 2023-24, Government has decided to raise ₹
20,000 crore through issuance of Sovereign Green Bonds.

7. • Mahila Samman Savings Certificate (MSSC):
• The introduction of the Mahila Samman Savings Certificate (MSSC)
reflects the government's dedication to women's financial inclusion.
With total number of accounts opened are at 14,83,980 with deposit
of Rs. 8,630 crore as on July 2023, this initiative empowers women
economically, offering an attractive 7.5% interest rate compounded
quarterly.

9. • National Investment and Infrastructure Fund in 202:
• NIIF launched its first bilateral fund, India-Japan Fund with Japan
Bank for International Cooperation (JBIC); working with U.S.
International Development Finance Corporation (DFC) towards setting
up of a multi-billion dollar green-transition fund

11. Initiatives for Promoting PPPs:
• VGF Scheme: Under the existing VGF Scheme, it had been observed that majority of the projects taking benefit of the scheme
were from economic sectors like roads etc. In order to promote PPPs in social sector like health, education etc., the ambit of the
existing VGF Scheme was expanded and the scheme was revamped in 2020 to include higher VGF support of upto 80% of CAPEX
and upto 50% of OPEX for PPPs depending on project sector and contours. During 2023, EC has accorded ‘In-principle’ approval for
VoC Port Project in Tuticorin, GoTN with TPC of ₹7,055 Cr and GoI VGF share of ₹1,450 Cr. Further, during 2023, Rs.410 Cr. have
been disbursed under the VGF Scheme.
• Revamping of IIPDF: The existing IIPDF was structured as a revolving fund with disbursement in the form of a refundable loan. Due
to these stringent provisions, there was not even a single proposal being received under IIPDF in the past 3-4 years. In order to
improve the uptake of the IIPDF, the existing fund was revamped and launched as a Central Sector Scheme on 03.11.2022 to
provide support to PPP project authorities for undertaking PPP Project Preparation. During 2023, 16 projects from 11 States with
TA cost of Rs.33.40 Cr. have been approved for funding under IIPDF Scheme and many more in the pipeline stage.
• Empanelment of TAs: A long standing demand from the Central and State PSAs had been for providing a list of pre-qualified
Transaction Adviser and streamlining the process of onboarding of Transaction Advisers for undertaking quality PPP project
structuring. Accordingly, 12 TAs have been empanelled by DEA through an RFQ process and panel has been notified on 01.07.2022.
further a Manual for the utilisation of the panel has also been issued. The TA panel has seen good uptake among states and has
been utilised for over 40 PPP transactions till date.
• Policy measures and Documents for supporting and mainstreaming PPP ecosystem such as – Reference Guide for Setting up State
PPP units, Reference Guide for PPP project Appraisal and Reference Guide for Project Implementation Mode Selection-Waterfall
Framework etc. were prepared and developed.
• IT Innovations - Revamping of the PPPININDIA website and Best Practices online portals for PPPAC, VGF, IIPDF was undertaken to
streamline the application process.
• PPP Appraisal - As the Central Nodal authority for appraisal of PPPs, the PPPAC housed in the DEA appraised VOC Port PPP Projects
with TPC of ₹7,056.00 Cr and Monetization of Telecom Tower Assets of BSNL under on Operate Maintain Transfer (OMT)
Concession with TPC of Rs.4,200

16. 2023 Year End Review for Department for
Promotion of Industry and Internal Trade
• Production Linked Incentive for 14 key sectors to enhance India’s manufacturing
capabilities and Exports
• Over 1,14,000 startups spread across all 36 States and UTs of the country create more
than 12 lakh jobs
• Alternative Investment Funds invest Rs. 17,272 crores in 915 startups
• 2.3 Lakh+ sellers and service providers active on ONDC network spread across 500+ cities
and towns across India
• Detailed Project Reports of Unity Malls in 17 States approved worth total amount of Rs.
2944 Cr
• Over 3,600 compliances decriminalized and more than 41,000 compliances reduced to
promote Ease of Doing Business
• More than 2,55,000 approvals facilitated through National Single Window System
• Make in India 2.0 focusing on 27 sectors to make India a Manufacturing Hub

17. Contd…
• PM GatiShakti becomes mainstream across Government
• Unified Logistics Interface Platform successfully integrates with 35 systems of 08
Ministries covering 1800+ fields
• Project Monitoring Group on-boards 2426 projects with investment of Rs 61.90 lakh
crores; facilitates resolution of 6978 issues
• Index of Industrial Production expands by 6.9% during Apr-Oct 2023 in FY 2023-24 over
corresponding period last year; Mining, Manufacturing and Electricity record robust
growth
• Index of Eight Core Industries registers robust growth of 8.6% during Apr to Oct, 2023-24
• Number of Patents granted witnesses eight-fold growth from 2014-15 to 2023-24 (upto
30th Nov, 2023)
• India retains 40th rank in Global Innovation Index retained in 2023 from 81st in 2015

18. Disinvestment/Divestiture
• Sale of an existing business or an asset class that may not perform or
meet the expectations of the company or a country
• Businesses and governments resort to divestment generally as a way
to pare losses from a non-performing asset, exit a particular industry,
or raise money.
• helps organizations to generate cash, thereby reducing debt and
making the company more attractive with a low debt-to-equity ratio

19. Reasons for Divestment
• Divest to Obtain Funds
• Focusing on Primary Business
• Prevention of Monopoly
• Availability of Other Investment Opportunities
• Inability to Achieve Synergy or Strategic Fit
• Social or Political Reasons

20. Types of Disinvestment
• Minority Disinvestment
- Examples : Power Grid Corporation of India Ltd., Rural Electrification
Corporation Ltd., NTPC Ltd., NHPC Ltd.
• Majority Disinvestment
- Examples : sale of Modern Foods to Hindustan Lever Ltd., CMC to Tata
Consultancy Services Ltd. (TCS), Bharat Aluminum Company (BALCO)
and Hindustan Zinc, both to Sterlite Industries Ltd., Indian Petrochemicals
Corporation Limited (IPCL) to Reliance Industries Ltd. And VSNL to the Tata
group.
• Complete Disinvestment
- Examples : 18 hotel properties of India Tourism Development Corporation
(ITDC) to Tata Group

21. National Investment Fund
• Govt.of India constituted the National Investment Fund (NIF) on 3rd
November, 2005
• Proceeds from disinvestment of Central Public Sector Enterprises are
channelized

22. Salient Features
• The proceeds from disinvestment of CPSEs will be channelised into the National Investment Fund
which is to be maintained outside the Consolidated Fund of India
• The corpus of the National Investment Fund will be of a permanent nature
• The Fund will be professionally managed to provide sustainable returns to the Govt., without
depleting the corpus. Selected Public Sector Mutual Funds will be entrusted with the
management of the corpus of the Fund
• 75% of the annual income of the Fund will be used to finance selected social sector schemes,
which promote education, health and employment. The residual 25% of the annual income of the
Fund will be used to meet the capital investment requirements of profitable and revivable CPSEs
that yield adequate returns, in order to enlarge their capital base to finance expansion/
diversification
• The NIF corpus was thus managed by three Public Sector Fund Managers. The income from the
NIF corpus investments was utilized on select social sector schemes, namely the Jawaharlal Nehru
National Urban Renewal Mission (JNNURM), Accelerated Irrigation Benefits Programme (AIBP),
Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY), Accelerated Power Development and Reform
Programme, Indira Awas Yojana and National Rural Employment Guarantee Scheme (NREGS).

23. Foreign Direct Investment (FDI)
• Investment from a party in one country into a business or corporation
in another country with the intention of establishing a long term
business
• Example : Mc. Donalds, Zara, H&M, Microsoft, Google, Honda Motors
are all FDIs in India
• Horizontal FDI
• Vertical FDI
• Conglomerate FDI
• Platform FDI

24. Advantages of Foreign Direct Investment
• Economic Development Stimulation
• Easy International Trade
• Employment and Economic Boost
• Development of Human Capital Resources
• Tax Incentives
• Resource Transfer
• Reduced Disparity Between Revenues and Costs
• Increased Productivity
• Increment in Income

25. Disadvantages of Foreign Direct Investment
• Hindrance to Domestic Investment
• Risk from Political Changes
• Negative Influence on Exchange Rates
• Higher Costs
• Economic Non-Viability
• Expropriation
• Negative Impact on the Country’s Investment
• Modern-Day Economic Colonialism

26. India FDI SNAPSHOT 2022-23
• Total FDI inflows in the country in the last 23 years (April 2000 - September 2023) are
$953.143 Bn while the total FDI inflows received in the last 9 years (April 2014 -
September 2023) was $615.73 Bn which amounts to nearly 65% of total FDI inflow in last
23 years.
• Total FDI inflows in the country in the FY 22-23 is $70.97 Bn and total FDI equity inflows
stands at $46.03 Bn.
• Mauritius (24%), Singapore (23%), USA (9%), Netherland (7%) and Japan (6%) emerge as
top 5 countries for FDI equity inflows into India FY 2022-23.
• Top 5 sectors receiving highest FDI Equity Inflow during FY 2022-23 are Services Sector
(Finance, Banking, Insurance, Non Fin/ Business, Outsourcing, R&D, Courier, Tech. Testing
and Analysis, Other) (16%), Computer Software & Hardware (15%), Trading (6%),
Telecommunications (6%) and Automobile Industry (5%)
• Top 5 States receiving highest FDI Equity Inflow during FY 2022-23 are Maharashtra
(29%), Karnataka (24%), Gujarat (17%), Delhi (13%), and Tamil Nadu (5%).

27. Routes through which India gets FDI
• Automatic route
- The non-resident or Indian company does not require prior nod of the RBI
or government of India for FDI.
• Govt route
- The government's approval is mandatory. The company will have to file an
application through Foreign Investment Facilitation Portal, which facilitates
single-window clearance. The application is then forwarded to the respective
ministry, which will approve/reject the application in consultation with the
Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of
Commerce. DPIIT will issue the Standard Operating Procedure (SOP) for
processing of applications under the existing FDI policy.

28. FDI prohibition

29. Factors that affect foreign direct investment
• Economic stability
• Regulatory environment
• Sectoral policies
• Political stability
• Infrastructure
• Wage Rates
• Access to free trade areas
• Tax Rates
• Market Size
• Labor Skills