Posts Tagged ‘venture capital’

Global Market Outlook 2009 and 2010 :)

SMC Market Outlook

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With markets giving returns on investment more than 79% in 2009 and showing a strong sign of recovery from mid 2009 on the back of strong domestic demand, policy reforms and stimulus packages, 2009 calendar year emerged as the best year for investors since 2000.

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FII’s have once again proved to be the front runners in terms of the inflow, pumping more than Rs 82,000 crore in the Indian market this calendar.

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But 2010 promises to be another testing year as fiscal and monetary stimulus in many of the world’s major economies begins to wane.

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After being in consolidation for most of the month, in the week gone by the domestic markets suddenly jumped back to life and closed at their highest in 19 months as investors rushed to buy stocks on renewed optimism, after foreign direct investment into the nation jumped 60% in the first eight months of this fiscal year.

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The FM`s comments on GDP growth and encouraging cues from global markets also boosted the market.

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Both the indices, Sensex and Nifty made a new high for 2009 on the eve of Christmas, rekindling the festive spirit.

Bulls were in a mood of rejoice as Christmas took Nifty to a new high of 5,197.90.

The year ends with more than a spark of hope, and next year seems to be a stable and profitable one.

However, we believe that markets would continue to be volatile and hence it is important to manage risk in the coming year too.


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For the forthcoming week, markets may remain volatile as traders will roll their positions in the derivative segment from December 2009 series to January 2010 series ahead of the expiry of the near month December 2009 contracts on Thursday, 31 December 2009.

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On the flip side higher advance tax figures by India Inc which suggests better Q3 December 2009 results, may support the market.

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Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.

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The global developments also need to be seen for any further directions.

Furthermore, food price index data for the year to 19 December 2009 will be closely watched which is going to release on Thursday, 31 December 2009.

The high food price inflation is a major worry for the policymakers as they contemplate a right approach to tame hike in inflation which seems to be more of a supply side issue.

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The next quarterly review of monetary policy is scheduled on 29 January 2010 which may also give some direction to the markets.

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On the global economic front, the US economy grew at a revised annual growth rate of 2.2% in the third quarter, much slower than initially projected.

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Japan’s unemployment rate rose to 5.2 percent from 5.1 percent in October, for the first time in four months in November, an indication job growth may not be strong enough to support the economy’s recovery from its deepest postwar recession.

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The world stock markets are not ready to react on the downside and after every consolidation they are moving up only.

4960 on nifty is strong support as was mentioned in last week magazine and the nifty touched there and moved up sharply.

Even the base metals and stocks are not reacting to the strong dollar.

Till the trend of stock markets is up, one should be playing from the long side of it.

Nifty has support between 5050-4970 and Sensex between 17100-16700 levels.

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New Year celebration may result in thin trading this week.It may impact domestic bourses as well.

Regarding outlook, dollar index will give next direction to precious metals. If it notices a pause in its rally then precious metals may trade in a range or vice a versa.

Base metals will remain volatile.

Gap between lead and zinc should shrink gradually.

Fresh buying in steel may keep nickel at higher side.

If US crude and other inventories continue to decline then fresh buying will stimulate in crude oil.

However, it already saw spiky moves hence upside is limited.

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In India, PE & VC Funds Turn Selective :)

PE and VC funds in India have tightened their purse strings.

PE and VC funds in India have tightened their purse strings.

Private equity (PE) and venture capital (VC) funds in India have tightened their purse strings.

That’s because limited partners (LPs) —the main source of funding for venture capitalists —are reducing their exposure in this space.

According to industry estimates, there has been a drop in new investments to the tune of 71% during the first nine months of 2009 as compared to the same period last year.

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Industry experts say limited partners are miffed with the returns shown by the general partners, who manage the fund and its operations on a daily basis.

Many LPs are looking at better returns and shorter investment term cycles, instead.

LPs have instructed some of their funds to conserve cash and value in the existing portfolio. Some limited partners are not investing in private equity funds on an incremental basis.

This assumes significance in the current context because it’s tough to raise fresh funds, and the competition to attract limited partners to VCs is quite intense.

A venture capital firm is usually structured in the form of a limited liability partnership and people who invest in it are limited partners.

In India, the bulk of venture capital inflow is from Foreign markets like the US and Europe, with limited partners mostly being institutional investors such as pension funds and insurance companies and family offices who are mostly based out of the US.

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Indian venture funds are also in place, many of which tap money from overseas by means of an offshore fund.

With new funds not in sight, private equity and venture capital firms are also becoming selective.

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Venture capitalists have little fancy for Indian start-ups

Venture capitalists have little fancy for Indian start-ups

Dreamy-eyed Indian entrepreneurs, hoping to talk their way into getting venture capital for their start-ups might as well look elsewhere for funding.

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It doesn’t happen in India, not often anyway, investors and experts in the industry, maintain.

Venture capitalists in India only prefer growth-stage companies — firms already up and running that need money for expansion.

Most start-up entrepreneurs, as a result, dive into their own pockets or banks, or draw funds from family and friends.


Seed capital for a new business has not come of age in India, they added.

The concept of seed capital does not exist in India, there are a few funds which have come up of late, but it is minuscule compared to the need and potential.

And the problem has also compounded by the current economic scenario, where financial institutions are more concerned with keeping their capital safe than risk their funds with a new venture.

Venture capital firms invested $740 million India in 2008 compared to $876 million in the previous year.

‘The number of deals were also down to 125 in 2008 from 144 in 2007.

Jagannadham Thunuguntla, equity head at SMC Capitals, has an explanation.

‘The confidence among foreign funds, be it venture capital or private equity, hasn’t been restored after what happened back home.’

According to him, these funds will start returning to the equities markets first, and later look at other avenues.

Among start-ups, too, there is intense competition to get venture capital funding.

And more often, there is one set of firms that comes up tops — IT-based businesses or companies that use the web to reach out to customers, said veteran venture capitalists.

A lot of venture capital firms look favourably at IT start-ups because once the concept takes off it is easier for such businesses to scale up.

Also venture capitalists generally have a Silicon Valley background and have a greater understanding of such types of business models.

Past record also matters — a larger number of IT firms have given attractive returns.

‘There is a reasonably long list of IT firms — MindTree, Spectramind, Mphasis, Daksh, Naukri.com — which have delivered good exits for venture capitalists.

Perhaps, that’s the reason why people like Manish Malhotra – who quit his position with a top bank to start a hospitality agency – are still floundering with their business.

‘Venture capital is difficult to get. I come from the banking industry and know people. But even then it hasn’t been easy at all to convince them that my plans will work,’ Malhotra said.

Dreamy-eyed Indian entrepreneurs, hoping to talk their way into getting venture capital for their start-ups might as well look elsewhere for funding.