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Rediff.com  » Business » Indian market beats Chinese in diversity

Indian market beats Chinese in diversity

November 29, 2007 09:39 IST
China may be hogging the headlines by multi-billion listings and Indian firms may look pygmies in comparison, but the local stock market is perhaps second only to the United States in terms of the diverse nature of stocks on offer for investors, say experts.

With the market capitalisation crossing $1.6 trillion within a couple of months after piercing the magical $1 trillion mark, and a vibrant equity derivatives segment to boast, the Indian stock markets look much attractive in terms of depth as well, they add. The equity derivatives market in China is only a recent start and is yet to catch momentum.

Chinese companies hit the headlines recently following spectacular listings by Petro China, Alibaba and an expected $5.5 billion IPO by China Railways, putting some of the biggest IPOs by Indian companies, including $2 billion by DLF and FPO by ICICI Bank, look smaller.

"The entire world seems to be looking at investing in India. China is an entirely different market. The Chinese market is about a few large state-owned companies dominating the entire business. India is not that. India is about a large number of entrepreneurs having presence in every sector competing with each other and making their market," explains Manisha Girotra, the managing director and chairperson of UBS.

For instance, in the banking sector, there are three large banks in China; that is very much the banking sector of that country. In contrast, India has several banks - large, medium and small - competing with each other for business across the country.

"China is a state-owned, state-led economy while we are entrepreneurial, capitalist and private-sector-led economy," she says.

With a price to earnings multiple of 50-plus times too, China is much more expensive and there is enough reason to believe foreign investors find India much attractive. The Bombay Stock Exchange's Sensex commands a price to earnings multiple 25 times at current earnings.

Explains Paul Parambi, the head of Kotak's International Business: "Chinese markets are driven by domestic liquidity. We are miles ahead of the curve. India has a fairly  sophisticated equity culture."

Adds Ajay Bagga, the CEO of Lotus Mutual Fund: "Our capital markets are much more diversified, while Chinese markets are led more by manufacturing and infrastructure sectors."

With the Securities and Exchange Board of India (Sebi) planning new products such as Indian Depository Receipts (IDR), the coming year will see multinational companies having presence in the country, tapping that market to list on the local exchanges, adding to the profile of Indian markets.

"We are in initial stages of talks with MNCs for IDRs. You could see MNCs listed on the New York Stock Exchange opting for dual listing by listing on BSE and NSE," said a senior investment banker on condition of anonymity.

Variety is spice for investors

  • China's market cap is $4.68 trillion compared to India's $1.6 trillion
  • China's biggest bank, ICBC, has a market cap of $320 billion compared to India's ICICI Bank's $31.49 billion
  • PetroChina, China's biggest oil company, has a market cap of $743.29 billion compared to Reliance's $101 billion
  • When Entertainment Network was listed on Indian stock markets last year, it became only the second listed radio company in the entire Asia-Pacific region (if not the entire world) after Australia's Austereo Radio Network Mundra Port and SEZ, which was listed yesterday, is perhaps the only listed port-and-SEZ combine in the world
  • MCX and UTI Mutual Fund are also set to hit the markets in coming months, making them India's first listed commodity bourse and first mutual fund respectively
Rajesh Abraham in Mumbai
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