baroda pioneer asset management company ltd Management discussions

BARODA PIONEER ASSET MANAGEMENT COMPANY LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS Indian economy grew by 9.0 per cent in 2007-08 supported by the growth of 4.5 per cent in agriculture, 8.5 per cent in industry and 10.8 per cent in services. Global financial markets witnessed turbulent conditions during 2007-08 as a result of deepening crisis in the U.S. sub-prime mortgage market. The Indian financial markets remained largely orderly during 2007- 08 except the equity market, which witnessed bouts of volatility in tandem with trends in major international equity markets. The domestic stock markets, which remained strong till early January 2008, witnessed a sharp correction beginning January 11, 2008 due to rising concerns over the severity of sub-prime crisis and its spill-over to other countries. As a result of the huge volatility witnessed during the year 2007-08, the Sensex gained 19.7 per cent and Nifty added 23.9 per cent on an annual basis. The Foreign Institutional Investors (FIIs) invested $12.7 billion in the Indian stock markets during 2007-08 as against net purchases of $5.7 billion during 2006-07. The major gainers in the stock markets during 2007-08 were metals, oil & gas, capital goods, fast moving consumer goods, public sector undertakings, banking and consumer durable stocks. Resources raised through public issues by the corporate sector increased sharply by 158.5 per cent to Rs 83,707 crore in 2007-08 over those in last year. All public issues during 2007-08 were in the form of equity except three, which were in the form of debt. According to the Ministry of Commerce, total foreign direct investment (FDI) inflows into India rose to $24.6 billion in 2007-08 from $21.9 billion in 2006-07. The Commerce Ministry expects FDI inflows to India to rise to $35 billion in 2008-09 despite the growing uncertainties in the world economy. Even though the rupee appreciated 7.8 per cent against the U.S. dollar in 2007-08, Indias merchandise exports grew 23.02 per cent in 2007-08 to $155.51 billion. The imports, however, stood at $235.91 billion primarily due the pressure of high oil import bill. The governments fiscal deficit in the first eleven months of 2007-08 declined 13.5 per cent on year-on-year basis and accounted for 73.4 per cent of the revised budget target for the entire financial year. In the Union Budget for 2008-09, the government has projected that the central governments fiscal deficit would narrow from 3.1 per cent of GDP in 2007-08 to 2.5 per cent in 2008-09.