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Capital markets maintain their buoyancy

India's capital markets have started the year on a high note. Despite worries about the weather and high oil prices, the economy is expected to have grown by 6.9% in the year ending this month. Small but significant steps have been taken towards economic reform in recent months.

After a long negotiation with its allies on the left, the United Front government finally raised the foreign direct investment limit in telecoms companies to 74% from 49% and recently opened up real estate to FDI. Rules restricting investment by Indian pension funds and banks in equity have been eased.

Standard & Poor's upgraded India's foreign currency rating in early February to BB+, one notch below investment grade, after a record year for Indian foreign currency debt offerings in 2004 when Indian companies issued foreign currency bonds, convertibles and raised syndicated loans worth over $7 billion. The latest to join them is Tata Power, which launched a five-year $200 million convertible bond on February 9 priced at a yield to maturity of 3.88% and a conversion premium of 50% to the closing price of the shares on February 8.

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