Here is a essay on the ‘Resource Mobilisation’ for class 11 and 12. Find paragraphs, long and essays on the ‘Resource Mobilisation’ especially written for school and college students.
Essay on Resource Mobilisation
Essay # 1. Resource Mobilisation through Primary Market:
The primary market, as evidenced by the phenomenal growth or resource mobilisation by the corporate and financial institutions accelerated the capital formation during 1991-92 to 1996-97 on a large scale and thereafter in a moderate scale. The total capital raised amounted to Rs.1,117 billion during 1991-92 to 1996-97 but during 1997-98 to 2000-01 it was only Rs. 241 billion.
The amount raised from primary market however increased manifold during the five years from 2001-02 to 2005-06. An amount of Rs. 904.5 billion from 316 issues was raised during this period.
According to the latest global IPO report of consultancy firm Ernst and Young India figures among the Middle East, South Korea and Brazil which are projected to record increased activity in initial public offers (IPO) in 2006. India is also in the list of 29 countries which raised more than $1 billion through 316 IPOs last year.
Of these, 205 were public issues mobilizing Rs. 802.3 billion and 111 were rights issues raising Rs. 102.2 billion. Of the 316 issues, 136 were Initial Public Offers raising 303.6 billion and 180 were Follow On or Rights Issues accounting for the balance Rs. 601 billion. The equity issues were made either at par or at a premium.
Only 15 percent of the equity issues (43 issues) were made at par raising less than 2 percent of the amount (Rs. 13.28 billion) raised through the issue of equity. The balance 85 percent of the issues (232 issues) were issued at premium raising 98 percent of the amount (Rs. 719.26 billion) raised by the issue of equity.
Following the economic reforms the Foreign Institutional Investors (FIIs) were allowed to invest in Indian securities market since 1992. FII’s can now invest in Government Debt securities and foreign securities also. Their investments enjoy full capital account convertibility. By the end of 2005-06, 882 FII’s had registered with SEBI which had a net investment of Rs. 1,370 billion during the years 2001- 02 to 2005-06.
Essay # 2. Resource Mobilisation by Mutual Funds:
The Mutual fund industry emerged popular among the Indian households and there was a steady increase in the resources mobilisation through various schemes. A total of 38 mutual funds mobilised a large amount of money from the investors. Between 2002-03 and 2005-06, the total net mobilised funds amounted to Rs. 915 billion.
Listing of Companies:
There was a manifold increase in the number of companies listed on the stock exchanges in the country, from 6000 at the beginning of 1990’s to 9,359 by the end of March 2004. The number of stock exchanges also increased from 11 to 23 during this period.
However, a less number of listed companies were traded and proportion of traded companies to listed companies fell from 41 percent in March 2000 to 26 percent in March 2001. On an average, about 30% companies on BSE and 96% of companies on NSE were traded every month during 2003-04.
The BSE Sensex rose to 11,357 during 2005 from 3,740 at the beginning of April 1999. The NSE Nifty too rose to 3434 from 1,528 in April, 2000. The movement of index both at BSE and NSE from the years 1999-00 to 2005-06. During FY04, the Indian benchmark index—Sensex delivered 84% returns followed by 16% returns during FY05 and a healthy 74% gains for FY06.
Returns from India have been among the highest across the emerging Asia for the fiscal year 2006 (April’05-March’06). At 74% return, India is far ahead of the next best 41% returns offered by the Korean equity market.
Returns from the Indian equity market has also been far ahead of other emerging markets such as Mexico (52%), Brazil (43%) or GCC economies such as Kuwait (26%). In short, the Indian equity market has delivered the highest returns in the world. This is the third consecutive year since FY04 that the Indian equity market has offered such incremental gains.
The market capitalisation at BSE also increased from Rs. 908 billion at the end of March 1991 to 30,220 billion at the end of March 2006 registering a sharp rise of about 3330 percent. The turnover also reflected the same trend. The average daily turnover at BSE came down from about Rs. 40 billion at the end of March 2001 to Rs. 12.5 billion at the end of March 2003 and went up to Rs. 32.5 billion at the end of March 2006.
The average daily turnover at NSE came down from about Rs. 53 billion at the end of March 2001 to Rs. 21 billion at the end of March 2002 and went up to Rs. 62.5 billion at the end of March 2006.
As a percentage of the GDP, the market capitalisation grew from only 5 percent in early 1980 to 14 percent by 1990. At the end of March 2001, the market capitalisation in the Indian stock exchanges stood at 39 percent of the GDP. At this level, the ratio was markedly higher, compared to the ratio prevailing before the initiation of the economic reforms.
With the rise in stock prices, market capitalisation at BSE surged to 76.7 percent of GDP on February 28, 2006 from 54.6 percent of GDP at end of March 2005. The turnover ratio, which was around 51% of GDP in 1993-94 declined to 34% in the following year but increased to as high as 178% by 1998-99 and further to 238% in 2000-01.
Turnover, market capitalisation, and price/earnings ratio on the BSE and the NSE have remained higher in the current year (2005-06) so far, than those in the corresponding period of the previous year. The Price Earnings Ratio too was higher at 19.06 and 18.27 at BSE and NSE respectively during 2005-06 as compared to 16.09 and 15.02 during 2004-05.
Trading at Stock Exchanges:
New technology redefined the stock exchanges in the country and the geographical location of a stock exchange has become irrelevant. The setting up of National Stock Exchange (NSE) in 1993 and the subsequent changes in trading system of Bombay Stock Exchange (BSE) lead the transformation.
Almost trading on the 23 stock exchanges was fully automated by the end of 1998. There has been a remarkable expansion of infrastructure to facilitate the growth of securities. BSE and NSE have terminals in over 200 cities and compete with each other. As at the end of March 2004, NSE and BSE are the 3rd and 5th largest exchanges respectively in the world. NSE is the largest exchange in stock futures.
Automation increased the turnover, number of trades and the number of shares traded per day. Between 1990-91 and 2005-06 the daily turnover of BSE and NSE increased from Rs. 1.88 billion to Rs. 95 billion, a fifty fold increase. This high level increase has been partly on account of automation of the exchanges, dematerialization of stocks and increase in the number of stocks traded on the exchanges.
Automation also resulted in increase in the average daily trading volume on the stock exchanges. In the early 1990’s, the average daily trading volume on the BSE was similar to that in London —about 60,000 trades a day. By 1998-99 this had increased nearly two and a half times to 1,45,824.
By 2005-06, this has increased to 264 million in BSE and 609 million in NSE. Also the number of shares traded increased from 3.37 billion in 1990-91 on the BSE to 151 billion in both BSE and NSE together at the end of March 2006.
Depositories like National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) have extended their coverage to almost all scrips. The number of companies covered under dematerialisation by NSDL has increased from 821 in 1999 to 6,022 in 2005-06.
The number of Depository Participants (DPs) under NSDL has increased from 124 in 1999-00 to 223 in 2005-06, the number of DP locations has increased from 1,425 to 3,017 during the same period registering more than 100% increase. The number of companies covered by CDSL under dematerialisation numbered to 5,479 at the end of March 2006, with 582 DPs having DP locations at 2,577 places.
Both NSDL and CDSL together have dematerialised 2,01,942 million shares up to the end of March 2006. Almost 100 percent of the trades in National Stock Exchange and 97 percent of the trades in Bombay Stock Exchange are carried out in dematerialized form as at the end of March 2006.
As the country’s stock markets negotiate new territory, several districts in the country—many of them classified as grade C or D and rural towns have witnessed the entry of new equity investors. The new interest in opening the demat accounts and also trading in shares is reflected in the figures compiled by the National Securities Depository Limited (NSDL).
The list of places where the investor distribution is growing is diverse, and ranges from South Parganas in West Bengal, Kheda and Mehsana in Gujarat, Dakshin Kannada in Karnataka, Krishna and Guntur in Andhra Pradesh and Kochi in Kerala.
In Periyar and Salem Districts in Tamil Nadu, and Rohtak in Haryana, more investors seem to be getting on to the equity bandwagon, going by the number of accounts. For example, in Periyar District, the number of active DP accounts rose from 14,554 in August 2004 to 16,678 at the end of January 2005.
The penetration into some of the interior districts seems to have been made possible due to the drive of depository participants and the private sector including private banks that have been quick to spot business opportunities. Private players like Geojit Securities, Karvy, India Bulls and Sharekhan have propelled the growth by opening several new branches in small towns by adopting the franchise model.
Derivatives segment has been successfully set up along with compulsory rolling settlement. Derivatives trading started in India with the launch of Index Futures in June 2000 followed by Index Options, Stock Options and Stock Futures in 2001. In June 2003, interest rate futures were launched on the Indian Securities Market.
Presently the derivatives market in India is dominated by NSE with its share of over 99 percent in the turnover as well as the number of contracts. In 2005-06 the turnover in the derivative segment of NSE is about 307 percent of the cash market. The average daily turnover in the derivative segment has risen significantly from Rs. 4.13 billion in 2001-02 to Rs. 193.75 billion in 2005-06.
The number of SEBI registered market intermediaries also increased during the period 1999 to 2006. The number of brokers in the cash segment increased from 9,069 to 9,339 whereas the number of sub-brokers in cash segment has increased from 4,589 in 1999 to 23,479 at the end of March 2006, nearly a fivefold increase over that of 1999 figures.