Financial services Sector

By Kritika Dhingra
FMS MBA(MS) batch of 2012

Financial services provided by finance companies include insurance, housing

financing, mutual funds, credit reporting, debt collection, stock broking,
portfolio management, and investment advisory.

Financial services

Capital markets Portfolio/asset management Nbfc/MFI

Capital markets Retail brokerage Mutual funds Nbfc Microfinance

India has 19 There are more Mutual funds in More than I2,500
microfinance
recognised stock than 8,000 India had assets NBFCs are segment in
exchanges. The NSE brokers under registered with
India is
and the BSE are the in addition to management RBI. More than
witnessing
main exchanges, over to the tune of 80% of the rapid
with NSE 75,000 sub- US$ 155 billion equipment hire
growth. These
contributing brokers (INR 7,132 billion) purchase institutions
more than 75 per registered with as of September segment reach out
cent of the SEBI. 2010. is financed by
to the grass-
turnover. them. root level&
have fewer
defaults
 The financial services sector contributed 15 per cent to India's GDP in in comparison
FY09, and is the second-largest component after trade, hotels, transport to
and communication all combined together, as per the Banking & Financecommercial
banks.
Journal, released by an industry body in August 2010.
  Financial services, banking, insurance and real estate sectors rose by 8
per cent during the quarter ended June 2010.

CAPITAL MARKETS

There are a total of 1,732 foreign funds registered with the Securities &
Exchange Board of India (SEBI).

Overseas funds infused US$ 4.78 billion in the capital market in November
2010, taking the year-to-date total to US$ 39 billion. The total inflows of
foreign institutional investors (FIIs) as on December 2, 2010 have crossed the
record US$ 38.76 billion mark.

According to data available with SEBI, FIIs have made investments worth US$
4.11 billion in equities and invested US$ 667.71 million into the debt market.

Recommendations which could move Indian capital markets closer to

efficiency and scale greater heights -
• Allowing higher investment by domestic institutional investors such
as insurance companies, pension funds and provident funds to make
investments in capital markets
• Make tax regime friendly for issuers/ investors of IDRs
• Make implementation of proposal of SME stock exchange effective
• Reduction in the current withholding tax of 20% on income from debt
securities to encourage investment in debt market
• Developing a legal and regulatory framework for Islamic finance and
structure new capital market products that are Shariah compliant
• Allowing institutional investors to participate in commodity markets

MUTUAL FUNDS
The average assets under management of the mutual fund industry stood at US$
160.44 billion for the month of September 2010, according to the data released
by Association of Mutual Funds in India (AMFI).
Since the 1990s when the mutual fund space opened up to the private sector,
the industry has traversed a long path. Assets under Management have grown
at a CAGR in excess of 25% over the last four years, slowing down only over
the last two years, as fallout of the global economic slowdown and financial
crisis

The industry continues to be plagued by

 low margins
  stiff competition from other investment products such as those offered by
of the life insurance industry and the portfolio managers

Suggestions –
• Allowing Asset Management Companies the flexibility to charge management
fees. In a “perfect competition” scenario, the price of goods or services is
efficiently determined by the market itself.
• Mutual fund distributors in India are largely unregulated. Further, there
are instances of distributors rendering investment advice without
requisite qualification, information of mutual fund schemes/investor
and consideration of the investor’s needs. Distribution supported by
quality investment advice is clearly the need of the hour.
products
• There are a plethora of similar sounding schemes offered by the
asset management companies resulting in a craving for lower number of
schemes with similar investment strategy.
The products are not innovative and offer limited asset classes with inadequate
opportunities for diversification.

Deals

The number of mergers and acquisitions (M&A), private equity (PE)

transactions and Qualified Institutional Placements (QIP) increased close to 40
per cent to US$ 3.23 billion in November 2010. Besides, there have been US$ 9
billion plus deals so far in 2010, the highest seen in any year.

Stock markets

Market capitalisation of India as a proportion of world market cap has risen to a

record high. According to data sourced from Bloomberg, the country's market
capitalisation as a proportion of the world market cap is currently 3.34 per cent.
India's current market-cap is US$ 1.55 trillion as compared with world market-
cap of US$ 46.5 trillion. This is higher than 3.12 per cent share India enjoyed at
the market peak of January 2008.

List of top 10 financial services companies in India

Find below a comprehensive list of top financial services companies in India.

SBI Capital Markets Limited:

This happens to be the oldest organizations in the sphere of capital markets in India. Established in 1986 in
the form of an ancillary of SBI, they have ranked second in Asia's Project Advisory services. The company
is a traiblazer in privatization and securitization. The subsidiaries of SBI Capital Markets are SBICAPs
Ventures Ltd., SBICAP Trustee Co.Ltd. and many others.

Bajaj Capital Limited:

One of the major financial services companies in India, Bajaj Capital offers best investment advisory and
financial planning services. The services are meted out to the institutional investors, NRIs, corporate
houses, individual investors, high network clients as well.

DSP Merrill Lynch Limited:

A major player in the equity and debt market in India, DSP Merrill Lynch offers financial advises to varied
corporations and institutions. With an array of wealth management and investor services, their services are
customized in a manner that they meet every investor requirement.

Birla Global Finance Limited:

The subsidiary of Aditya Birla Nuvo Ltd., this company has operations in the corporate finance and capital
market arena. An alliance with Sun Life Financial of Canada, they have given birth to Birla Sun Life
Insurance Co Ltd., Birla Sun Life Distribution Co. and alike.

Housing Development Finance Corporation:

A best financial solution for home loans, NRI loans, HDFC is the one stop destination for personal finance.
With overseas branches in Singapore, Kuwait, Qatar, Saudi Arabia and many others, HDFC has been
going great guns every year.

PNB Housing Finance Limited:

This company offers premium solutions for relieving the borrower segment. The Home Loan Life Insurance
Plan of this has come in conjunction with TATA AIG, with the lowest premium when compared to the peers.

ICICI Group:

Wide arena of financial products and services, ICICI Group has solutions like InstaBanking, Online Trading,
Insta Insure, ICICI Bank imobile etc. Providing high class financial services in all segments of the society,
ICICI Group deals with Mutual Fund, Private Equity, Securities, and Life Insurance etc.

LIC Finance Limited:

It is the biggest Housing Finance Company in India, providing finance to individuals for repair or
construction or renovation of any old or new apartment or house.

L & T Finance Limited:

Established in 1994 by the Larsen and Turbo group, this has become a significant name in the financial
sector. Funds for automobiles, Agricultural Instruments, secured loans; they have all types of loans for a
long tenure.

Karvy Group:

With Mutual Funds Services, Depository Services, Debt Market Services, Investment Banking and many
others, Karvy Group has spanned across the domestic financial sector as well as abroad.