the indian finance sector, portfolio management.ppt · the indian finance sector, portfolio...
TRANSCRIPT
The Indian Finance Sector,
Portfolio Management,
MF and Investment Advisors
Overview, Present and Future
Gaurang Shah
Overview, Present and Future
28th Dec 13
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� Financial Sector
� Current Issues
� Opportunities in Financial Services
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� Financial Sector
� Current Issues
� Opportunities in Financial Services
3
Constituents
� Commercial Banks� Schedule commercial banks – 151, of which� Public Sector Banks – 25� Private Sector Banks – 20
� Insurance� Life (1+23)� Non Life (4+21) *
� Mutual funds� Mutual funds� UTI, LIC & Bank sponsored (9)� Private Sector (18)� Foreign (8)� Private sector Joint Ventures (10)
� Pension – PSU (3) , Private Sector (6)
� NBFC –� Deposit - 254 #� Non Deposit – 11,918 @
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Bank source - RBI June 13
Mutual Fund source - AMFI
* General insurance companies exclude Export Credit Guarantee Corporation of India Ltd. &
Agriculture Insurance Co. of India Ltd.
# As on 31st May 2013. Source – RBI website. Excludes 2 RNBC’s.
@ As on 30th November 2012. Source – RBI website.
Mutual Funds, 7,45,968
Provident Fund, 5,05,000
Small Savings, 6,02,072
Stock of Financial Savings
6% of GDP
5% of GDP
7% of GDP
Rs. Crs
Bank Deposits, 74,77,930LIC, 14,89,640
Private Life Insurance, 3,49,474
79% of GDP
14% of GDP
Bank deposits - as on 29st Nov 13; Source - RBI
Life Insurance – total AUM as on Sep 2013, LIC AUM as on Mar 2013, Private AUM derived as the balancing figure; Source – Life council
Mutual Fund – as on 30st Sep 2013; Source - AMFI
Small Savings – as on Feb 2013;
Provident Fund – as on 30 Nov 13 Source – ET
GDP – 94,61,013 crs at factor cost 2012-13; Source - RBI
3% of GDP
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Distribution of AUM
Banks MixSBI and associates 22%Nationalized banks 52%RRB's 3%Private banks 18%Foreign banks 4%
Mutual Funds Rs. Crs MixDebt 554,124 74%
Insurance Rs. Crs. MixEquity 454,556 25%Fixed Income 1,353,440 74%
Particualrs Rs. Crs.
Bank Deposits 7,477,930
Life Insurance Funds 1,839,114
Mutual Funds 745,968
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Equity 162,449 22%Balanced 15,218 2%Others 14,176 2%
Small Savings Rs. Crs. MixDeposits (Post office, NSS, Senior citizen)
366,884 61%
Certificates (NSC.KVP,IVP) 196,367 33%PPF 38,821 6%
Others 31,118 2%
* Including 2 RNBC’s Rs 3,501 Crs
Banks – as on 29th Nov 2013, source RBI; Mix as on Mar 13
MF - as on 30th Sep 2013, source AMFI
PF – as on 30th Nov 2013, source Economic Times
Life Insurance – Life Council as on Sep 13
Mutual Funds 745,968
Small Savings 602,072
Provident Fund 505,000
NBFC* 10,586
159,600
179,500
617,000Bank Deposits
Life Insurance
Currency
56%
16%
10%
Rs Crs.
Composition of Financial Savings – FY13
source – RBI annual report 2012-13
Over 66% of incremental savings are still going into Bank deposits & Currency (FY12 – 64%)
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-9,000
34,400
112,100PF, Pension
Shares, Debentures & MF
G-Sec & Small Savings
15%
3%
13%
9%
9%
8%
Japan
Germany
Netherl…
India % of GDP as on 2012
Mutual Funds - % of GDP
72%
53%
43%
33%
US
France
Switzerl…
UK
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Source: The City UK estimates based on UBS, OECD, SwissRe, Investment Company Institute dataGDP Source: India - RBI website; Other countries – Work Bank 2012
40%
39%
25%
20%
Germany
Netherlands
France
India
% of GDP as on 2012
Insurance AUM - % of GDP
111%
65%
57%
44%
40%
UK
Japan
Switzerland
US
Germany
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Source: The City UK estimates based on UBS, OECD, SwissRe, Investment Company Institute dataGDP Source: India - RBI website; Other countries – Work Bank 2012
25%
8%
6%
4%
Japan
France
Germany
India % of GDP as on 2012
Pension Funds - % of GDP
150%
123%
112%
108%
25%
Netherlands
UK
Switzerland
US
Japan
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Source: The City UK estimates based on UBS, OECD, SwissRe, Investment Company Institute dataGDP Source: India - RBI website; Other countries – Work Bank 2012
� Financial Sector
� Current Issues
� Opportunities in Financial Services
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Current Challenges
How do we convert a “Nation of Savers” into a “Nation of Investors” ?
� Falling Financial Savings� 7.5% of GDP takes us back to 80’s
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Fall in household savings
12% 13%12% 12% 11% 14%
13%13%
14%14%
18%
23%24% 24% 23%
22%24%
25%
24%22%
15%
20%
25%
30%
15%
20%
25%
30% Physical Savings as a % of GDPFinancial Savings as a % of GDPHousehold Savings as a % of GDP
13Source :- Economic Survey 2011-12 Source for GDP growth rate :- RBI
2% 3%5%
7%10% 11% 10%
12% 11% 12%10%
12%10%
8%5%5%
7%
7%
8%14%
7%8%
12%
0%
5%
10%
15%
0%
5%
10%
15%
1950s 1960s 1970s 1980s 1990s 01-04 04-05 05-06 06-07 07-08 08-09 09-10 10 -11 11-12
Current Challenges
How do we convert a “Nation of Savers” into a “Nation of Investors” ?
� Falling Financial Savings� 7.5% of GDP takes us back to 80’s
� Increase in gold imports and high real estate prices
� Is low real interest rate hurting?
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CAD & Gold
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Higher gold demand explains more than half of CAD deterioration, average yearly gold imports before 2008 was around only $15bn compared to $50bn in current period.
High CAD lead to depreciation of the Rupee, putting upward pressure on inflation and interest rates
Current Challenges
How do we convert a “Nation of Savers” into a “Nation of Investors” ?
� Falling Financial Savings� 7.5% of GDP takes us back to 80’s
� Increase in gold imports and high real estate prices
� Is low real interest rate hurting?
� Low Tax-GDP ratio at 9.9% in 2011-12 (direct taxes 5.5%; indirect taxes 4.4%) –down from a peak of 11.9% in 2007-08
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down from a peak of 11.9% in 2007-08
�Bringing retail investors back to the Market
Retail participation in Stock Markets
� Retail participation at 10-year low
� Daily cash market average volume of retail investors is down to Rs 4,615 crore in 2013, lowest since 2003 and 66% down from peak of Rs 13,709 crore in 2009.
� Of a population of over one billion, around 18 million invest in equity markets*markets*
� In November 2013, there were 21.6 million retail accounts that accounted for less than 2 per cent of the population#
@ - Source - ET Oct 21, 2013• - Source - Business Today – April 2011 edition# - FM Chidambaram speaking at the 20th anniversary celebrations of the National Stock Exchange in Mumbai – 14th December 2013
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Retail Participation in Mutual Fund
Rs. Crs
Retail participation (Including HNI ) is at 48%* HNI defined as individuals investing Rs 5 lakhs and above
MF - as on 30th Sep 2013, source AMFI
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Current Challenges
How do we convert a “Nation of Savers” into a “Nation of Investors” ?
� Falling Financial Savings� 7.5% of GDP takes us back to 80’s
� Increase in gold imports and high real estate prices
� Is low real interest rate hurting?
� Low Tax-GDP ratio at 9.9% in 2011-12 (direct taxes 5.5%; indirect taxes 4.4%) –down from a peak of 11.9% in 2007-08
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down from a peak of 11.9% in 2007-08
�Bringing retail investors back to the Market
� Financial inclusion
� Importance of the financial intermediaries� Fair remuneration
�Well directed tax benefits
� How do we make the markets safer? – Corporate governance / fraud control
Distribution regulation
� There is already convergence at the Distribution level� Can regulators converge?
Life
Insurance
(Private)
Asset
Management
(Retail)
Banks 39% 31%
IFA /Agent 44% 37%
Source :- IRDA Annual Report FY12 and Mckinsey – for AMC FY12
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IFA /Agent 44% 37%
CA / Brokers 13% 23%
Direct 4% 9%
� Intermediary Regulation� Make the distributors responsible
� The draft banc assurance regulations
� SEBI (Investment Advisors) Regulations, 2013
� “One license” across all products for individual
Taxation
�Long term savings have to be incentivized
�S.80C benefit
� Differentiate only on the basis of time horizon of investment
� Benefits need to be amended� Benefits need to be amended
�Parity in tax treatment
� A pension product offered from any platform should be subject to the same taxation
�Direct Tax Code – an opportunity
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� Financial Sector
� Current Issues
Points to be resolved
� Opportunities in Financial services
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� Career Opportunities – Research, Actuarial, Credit analysis, Analytics, and Outsourcing opportunities – significant demand in fields like Actuarial for finance professionals
� Fund Management in AMC / Insurance industries – offers exposure to operations of markets and opportunity to manage large corpus in dynamic market settings
� Financial advisory services – Portfolio management, Asset allocation & Financial planning
Distribution of financial products
Opportunities for Chartered Accountants
� Distribution of financial products like Insurance/MF – existing client base / looking for professional financial advice or investment guidance; ability to evaluate investment options on various parameters, to help clients in financial planning
� Financial education in itself is a vast area – huge demand for education on financial concepts to be conducted by professionals
� Audit & Certification - Increasing regulatory requirements lead to significant amount of audit & certification work e.g. in Life Insurance sector – beyond statutory and internal audits; there are assignments like certification of NAV, audit of rural/social obligations, Group credit term processes / claims settlement process etc.
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Thank You
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