India Capital Market

Capital Markets

Capital Markets

The retail and Institutional segments in India trade from over 1500 locations in over 10 assets class. Besides the Equity, well developed Derivatives and Fixed Income segment, fast growing Currency and Commodities segment, a diverse Mutual Funds segment exist. The passing of the Insurance bill by the Parliament in 2015 marks a important step in developing this segment, though the larger Pension Funds segment and Insurance segment is still in infancy. The emergence of new segments like SME segment, HNI segments etc. adds diversity and growth of the Indian Capital Market.

Securities Market

Securities Markets

Year 2014-15 witnessed significant changes in enabling FIIs to invest in India. Key changes included Introduction of new KYC norms, FPI regulations (* detailed note in said section), Depository Receipts related developments easing of FDI norms. This, besides a stabler and progressive Central Government. The major trends that have emerged in the Indian Securities Services domain, that significantly influence the face of Securities Services are:

  • SEBI recognised Custodians (DDPs) increased to 19, with more in offing. Assets in Demat mode approximately USD 2.00 Trillion. Assets under Custody approximate USD 1 Trillion .
  • Leading Stock Exchanges , Clearing Corporations, Custodians being engaged in developing FPI Category III segment
  • Emergence of GIFT city as an potential Financial Hub
  • Diversification of products / segments assure an increased assets under Custody / administration.
  • Global players presence in India and emergence of Non-bank Custodians.
  • Enrichment of Custodial services / products: Evolution from merely custodial services to being full provider across multiple segments.
  • Rapid development of Capital market and Banking infrastructure; greater emphasis on implementation of best practices, straight through processing, and continued investor education.
  • The Forward looking Sahoo Committee Recommendations wrt Depositary Receipts and ECBs
  • Postponing of GAAR while issues wrt MAT emerges for previous period
  • Varying models of Intermediaries value chain: fully integrated to specialized, single location to multi-local.

These trends will be key drivers leading to growth of pan India players, reflecting Institutional and retail clients aspirations of a Securities Services provider.

Securities Services

Securities Services

The developments in India have, increased the need for full fledged Securities services providers. Provider beside being well Capitalised need technology driven solutions and local market expertise. Providers are expected to understand the needs and complexities required to provide a diverse product mix, ensure a high degree of confidentiality, engage in straight through processing and adopt risk containment measures and best practices.

As Capital Market grows, the diversity of services needed to address the complexities will also evolve and grow.

Developments of Market infrastructures in payments and securities businesses being key factor in the reduction of systemic risks will play a pivotal role in the building of a unified market.

Challenges

Challenges

Investors and intermediaries in India face a number of complexities ranging from non-availability of key data necessary to make informed decisions, to multiplicity of Stock Exchanges, Settlement Processes, Depositories and Regulators. Operational complexities include:

  • High costs, complex norms resulting in perception of a long lead-time in entering India
  • Ever-growing operations expenses, Thinning margins
  • Limited number of highly trained personnel
  • Significant investment in Technology
  • Technological up-gradation and resultant redundancies
  • Challenges from using third party providers
  • Lack of standard best practices
  • Variance in service levels amongst local/cross border Custodians as well as between established and new entrants
  • Evolving compliance requirements, Taxation related conplexities
  • Developing risk management systems
  • Fierce competition, especially in the Retail segment

The above challenges impact business decisions and strategy, operations, service quality, and consequently margins and market share.