Indian financial services industry: Financial services is the backbone of of economic growth and development of a nation. Finance industry enables creation of new business and expansion of existing ones. Ultimately this facilitates more employment and job creation with the growth of other mainstream industries. The financial services industry manages money for individuals and corporations. Finance sector mainly comprises of commercial banks, insurance companies, non-banking financial companies (NBFC), co-operatives, pension funds, mutual funds and other smaller financial entities.
Indian financial services industry
Let’s take a look at overview of Indian financial services industry at the beginning of 2018.
Overview of Indian financial services industry
Asset management industry in India is one of the fastest growing industry in the world. Total AUM of the industry increased 40 per cent year-on-year to hit a record Rs 23 lakh crore (US$ 358.78 billion) at the end of November 2017. Corporate investors accounts for around 46.26 per cent of total AUM in India. High Net Worth Individuals and retail investors account for 28.01 per cent and 22.96 per cent, respectively.
Revenues of the brokerage industry in India are estimated to grow by 15-20 per cent to reach Rs 18,000-19,000 crore in FY2017-18.
Insurance industry is another important constituent of Indian financial services industry. The insurance industry has been expanding at a fast pace. The total first year premium of life insurance companies grew 18.9 per cent year-on-year to reach US$ 18.44 billion during April-November 2017.
Even Initial Public Offers (IPOs) has also shown a healthy expansion. The year 2017 saw listing of a total 153 IPOs in indian stock market raising a total US$ 11.6 billion.
Government incentives for financial services industry
SEBI has allowed exchanges in India to operate in equity and commodity segments simultaneously, starting from October 2018. The banking regulator has recently allowed inclusion of payments banks for better facility of fund transfer.
The Government and RBI have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises. They have launched Credit Guarantee Fund Scheme for Micro and Small Enterprises. Government has also set up Micro Units Development and Refinance Agency (MUDRA for small scale industries.
Road ahead for Indian financial services industry
India is today one of the most vibrant global economies, on the back of robust banking and insurance sectors.
The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than three times growth in investor accounts to 130 million by 2025. Ref: ibef
India’s mobile wallet industry is estimated to grow at a Compound Annual Growth Rate (CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions to touch Rs 32 trillion (USD $ 492.6 billion) by 2022.
Indian financial services industry outlook for 2018
It is projected that national savings in India will reach US$ 1,272 billion by 2019. Over 95 per cent of household savings in India goes to bank deposits and only 5 per cent in other financial asset classes. But landscape is changing rapidly at present.
The relaxation of foreign investment rules has received a positive response from the insurance sector. Many foreign companies announcing plans to increase their stakes in joint ventures with Indian companies. Over the coming quarters there could be a series of joint venture deals between global insurance giants and local players.
We are positive positive on brokerage industry, few holding companies, low cost housing finance industry and insurance industry for 2018 and beyond. NBFC Industry is one of our favorite industry at present where as we foresee challenges in Indian baking sector.
After scanning the entire financial services industry; we have short listed few potential multibaggers for the next 2 to 3 years of time horizon. Few analysis will be available to all in this site. Add a comment if you have any thoughts and contact us if you have any queries. And do share with others if you feel this will benefit them.