Industry Analysis Of Financial

Services
Grp.No13
Swati
Samit
Ronald
PLACES TO SAVE MONEY

Would you save your money in any of these places?

Why? Why not? Can you think of other places to save
money?
• Bed & Mattress
• Cookie Jar
• Pillow
• Wallet
• Money Belt
• Small House Safe
 What are Financial Services?
• C:\Users\Ronald\Documents\Ronald
F.Services\Financial_Services_060710.pdf

FORMAL
FINANCIAL SERVICES
• Accounts
• Credit cards
• Loans
• Investment vehicles
• Direct deposit
• Wire transfers/ remittances
INFORMAL
FINANCIAL
SERVICES
• Payday lenders
• Check cashing services
• Rent-to-own stores
• Pawn shops
• Title lenders
• Loans from family/friends
• Cultural savings clubs
• Remittances offered through
nonfinancial institutions
• Banks

• Foreign exchange services

• Investment services

• Insurance

• Other services
 Banks
• A landmark was registered in the Indian banking sector when the major
banks were nationalized in 1969.

• Commercial banks

• Investments banks

• Bonds (debt)

• Stocks (equity)

• Notary services

• Credit cards
 Stock market

• Origin  Pre-independence  Post-independence

• India's market cap as a percentage of world market cap was 2.8 per
cent as on December 31, 2009.

• In 2009, there were 21 IPOs that raised US$ 4.18 billion as compared to
36 IPOs in 2008 that raised US$ 3.62 billion.

• QIP is a capital raising tool, whereby a listed company can issue equity
shares, fully and partly convertible debentures, or securities other than
warrants, which are convertible into equity shares, to a qualified
institutional buyer (QIB).

• In 2009, Indian companies had raised close to US$ 7.13 billion

 NSE
Trading at NSE

• Fully automated screen-based trading mechanism

• Strictly follows the principle of an order-driven market
• Trading members are linked through a communication network
• This network allows them to execute trade from their offices
• The prices at which the buyer and seller are willing to transact will appear on the
screen
• When the prices match the transaction will be completed
• A confirmation slip will be printed at the office of the trading member

Advantage of trading at NSE

• Integrated network for trading in stock market of India

• Fully automated screen based system that provides higher degree of transparency
• Investors can transact from any part of the country at uniform prices
• Greater functional efficiency supported by totally computerized network
Foreign Exchange

• Currency exchange

• Wire transfer

• Foreign currency banking

 Investments services

• Asset management

• Hedge fund management

• Custody management
 Insurance

• India 5th largest life insurance market in the emerging

insurance economies globally and the segment is
growing at a healthy 32-34 per cent annually (LIC)

• Total first year premium collected in 2009-10 was US$

24.64 billion, an increase of 25.46 per cent over US$
19.64 billion collected in 2008-09.(IRDA)

• Brokers

• Underwriters
Others

• Private equity
• Angel investor
• Conglomerates
• Debt resolution
• Venture capital -Presently in India there are around
34 national and 2 international SEBI registered
venture capital funds
• Mutual funds
• Mortgage companies
• Investment research agencies
 List of top 10 financial services companies in India

• SBI Capital Markets Limited:

• Bajaj Capital Limited:
• DSP Merrill Lynch Limited:
• Birla Global Finance Limited:
• Housing Development Finance Corporation:
• PNB Housing Finance Limited:
• ICICI Group:
• LIC Finance Limited:
• L & T Finance Limited:
• Karvy Group:
 Economic Updates

• Indian economy growth - 7.4 per cent in 2009-10.

• (CSO) – financial services 9.7 per cent in 2009-10
• (SEBI) Investors (FIIs) as on May 31, 2010 was 1710
• FII inflow in equity US$ 4.6 billion
• US$ 5.9 billion in debt.
• Net investment June 1-14, 2010 was US$ 530.05 million
• US$ 875.73 million in debt
• Mutual fund US$ 170.46 billion May 2010- US$ 135.58
billion May 2009, (AMFI).
• India's foreign exchange reserves US$ 271. billion, an
increase of US$ 9.87 billion (RBI)
 Consolidation

• Increasing the number of customers and beating competitors by

selling various Financial products through one distribution channel.

• Diversifying products and customers to avoid the risk and to finance a

loss-making part of the business with the profits of another one.

• Maintaining a large capital base as a sponge to absorb losses and the

growing cost of technology.
•
• Increasing the quality of service and products to gain the trust of the
customers.

• Increasing profitability in the battle against competitors

 Performance  Financial Services

• At about $900 billion, India's stock of financial assets—including bank

deposits, equities, and debt securities—is one-fifth the size of China's The
gap is widening: by 2010, China's financial stock will reach $9 trillion,
while India's will remain below $2 trillion.

• India's financial system is more effective than China's, largely because the
market share of more efficient foreign and privately owned banks in India
has crept up to 25 percent.

• Many nonperforming loans have been cleaned up, and while the true
figure is hard to determine, they are now estimated at around 9 percent
of all lending, compared with up to 40 percent in China.

• India's stock market is booming, and its best companies list shares
abroad.
 Growth  Financial Services
 Present is nearly 8.5% per year. The rise in the growth rate suggests the
growth of the economy.

 To maintain such a growth for a long term the inflation has to come down
further.

The financial sector in India had an overall growth of 15%, which has
exhibited stability over the last few years although several other markets
across the Asian region were going through a turmoil.

 With the opening of the financial market variety of products and services
were introduced to suit the need of the customer.

 The Reserve Bank of India (RBI) played a dynamic role in the growth of the
financial sector of India.
 KPO
• The Knowledge Process Outsourcing industry
(KPO) is expected to grow 45% in size by 2010.

• Global KPO pie in 2010 will be around $17

billion of which $12 billion (70%) will be
outsourced to India.
 Corporate & Investment banks
Purpose
• Budgeting and forecasting
• Control and variance analysis
• Investment appraisal
• Valuation
• •
Equity research Valuation
• Debt pricing
• Project appraisal
• Structured finance
• Derivative pricing
Skill set
• Business understanding
• Modeling & software knowledge
• Accounting and tax aspects
• Appraisal techniques
Business & industry understanding
• Modeling and software knowledge
• Accounting and tax aspects
• Financial engineering
 Financial Services

Asset Management
Banks & Capital Markets Insurance
• Mutual Funds
• Foreign Institutional
Investors (FIIs)
•Banks
• Private Equity/ Venture
•Stock Brokers •Life
capital
•Commodity Brokers •General
• Portfolio Management
•NBFCs •Reinsurance
Services (PMS)
• Investment Advisors
 Seizing opportunities
• Identifying customer wants and developing products
and services .

• If we have the right products, the right tools and the

right customer-service experience, we will have a very
sticky relationship with our customers.

• If you can develop and sustain a reputation , this is a

time of great opportunity.

• Companies with the flexibility to adapt to changing

conditions are well positioned for growth.
Conclusion: Looking to the future
!Harness technology to manage risk while offering greater levels of service and
more unique products at a lower cost by integrating processes from front to
back office

! Lift cross sales by providing such good service that customers concentrate
more business with one provider

! Identify customer preferences through data mining and in-depth research

! Create innovative products and services to keep up with demand for

technological solutions from the young and advice for the retiring

! Offer tiered pricing and services without estranging customers

! Institute a culture of service through effective training and performance pay.

Recession 2008Impact
• Indian banking system has had no direct
exposure to the sub-prime mortgage assets or
to the failed institutions.
• India’s recent growth has been driven
predominantly by domestic consumption and
domestic investment
• Merchandize exports, accounts for less than
15% of our GDP.
• First, the Indian stock markets, both BSE as well as NSE,
fell dramatically over 2008 .

• India’s main index sensex plunged nearly 50% during

the year from a high of 19,080 in January 2008 to
8,674 in January 2009.

• The NSE also fell by a similar percentage.

• Foreign institutional investors pulled out close to Rs

50,000 crore (Rs 500 billion) from the domestic stock
market in 2008-09, almost equalling the inflow in the
previous fiscal.
• Securities and Exchange Board of India website,
FIIs’ net outflows have been Rs 47,706 crore (Rs
477.06 billion) till March 30 in the financial year
2008-09 as against huge inflows of Rs 53,000
crore (Rs 530 billion) in the previous fiscal.

• Money and credit markets under pressure.

• E.g.Mutual fundsNBFS
 Resistance ???
• Supervisory Review Process (SRP)

• Investment Fluctuation Reserve (IFR)-5%

• ‘Held for Trading’ (HFT) & ‘Available for Sale’ (AFS)

•
• Housing loan Rs.30 lakh (USD 75,000 approx) to
individuals against the mortgage of residential housing
properties from 75% to 50%

• Financial Accounting-Conservative(net loss)

• Private –>Investments
• Address aspects of coverage
• Regulatory requirements
• Listing and rating requirements
• Fixing of prudential limits
• Internal assessments
• Role of boards
• Disclosures & trading settlement in debt securities
 Steps Taken

• Setting up of the Clearing Corporation of India Limited

(CCIL) to act as central counter party for facilitating
payments and settlement system relating to fixed income
securities, money market instruments and foreign
exchange transactions.

• Setting up of INFINET as the communication backbone for

the financial sector.

• Introduction of Negotiated Dealing System (NDS) for

screen-based trading in government securities.
• Debt recovery tribunals, asset reconstruction
companies, settlement advisory committees,
corporate debt restructuring mechanism, etc. for
quicker recovery / restructuring of stressed assets.

• Interest (SARFAESI) Act, 2002 and its subsequent

amendment to ensure creditor rights; setting up of
Credit Information Bureau of India Limited (CIBIL) for
information sharing on defaulters as also other
borrowers
THANK YOU