Drivers of private equity investments: An investigation in the indian market

Abstract

This paper analyzes the determinants of private equity investments in India and focuses on capital movements between 2004 and 2012. The variables against which investment patterns have been studied are - Indian Stock Market Indices (Sensex/Nifty), GDP Growth Rate, PE-VC Returns, IPOs (volume & values), FII Activity, M & A Activity, QIP Activity, Rate of Inflation and the Exchange Rate. This study reviews the sparse literature on factor analysis of PE-VC investments and protracts it by forming a superset of influential variables and then testing them against investments in India. The paper finds that the previous year's GDP Growth, FII inflows and IPO activity play significant role in the size of PE-VC investments for a given year. Also, PE-VC investments are strongly influenced by the market capitalization, PE-VC returns and exchange in any given year.