Interesting times for Indian capital markets transactions

The fiscal year ended 31 March was exceptional for the Indian capital markets. Primary equity issuances provided record levels of capital, and secondary market issues reached new highs. International capital inflows were also at record levels.

However, Indian markets have not been immune to the volatility in the global financial markets in fiscal 2012, triggered primarily by concerns over the economic outlook for the United States and Europe. The SENSEX fell 23% from its 52-week high of 21,108.64 on 5 November 2010 to a low of 16,141.67 on 19 August 2011.

Spillover effect

Increased market volatility has had an adverse impact on investor demand for equity investments in emerging markets. Many large Indian initial public offerings (IPOs) expected to take place late in fiscal 2011 or early in fiscal 2012 have been delayed or cancelled. This was despite Indian IPO deal volume remaining stable in the fourth quarter of fiscal 2011 and the first quarter of fiscal 2012 versus the same period in the prior year – the six months ended 30 June saw a total of 59 IPOs compared to 58 in the same period in 2010. Notably, there has been a significant decline in qualified institutions placements (QIPs), which fell from 58 in fiscal 2010 to 41 in fiscal 2011.

Stephen Peepels, a partner in the corporate group in Hong Kong, heads the US capital markets team for Asia. DLA Piper is the world’s largest legal practice with more than 4,200 lawyers in 76 offices across 30 countries.