Financial Services in India

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Rimjhim Singh
Sem. II

Financial Services in India
The financial services sector contributed 15 per cent to India's GDP in FY09, and is the second-largest component after trade, hotels, transport and communication all combined together, as per the Banking & Finance Journal, released by an industry body in August 2010. Share of Financial services, banking, insurance and real estate sectors is expected to enhance by 9.7 per cent for the year 2009-10 to 17.2 per cent of GDP (at factor cost). Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of registered sub-accounts rose to 5,592 as of November 10, 2010. Overseas funds infused into Indian capital market in 2010 stood at US$ 39 billion. According to data released by Securities and Exchange Board of India (SEBI), stocks and debt securities over worth US$ 17.28 billion were purchased by the foreign institutional investors (FIIs) from the Indian capital market in January 2011. 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. The average assets under management of the mutual fund industry stood at US$ 147.99 billion for the quarter ended December 2010, according to the data released by Association of Mutual Funds in India (AMFI). As on January 21, 2011, India's foreign exchange reserves totaled US$ 299.39 billion, according to the Reserve Bank of India's (RBI) Weekly Statistical Supplement. According to Venture Intelligence, a research firm, private equity firms invested US$ 7,974 million over 325 deals in India during 2010, as against US$ 4,068 million (over 290 deals) in 2009. The largest investment reported during the year was the US$ 425 million raised by power generation firm Asian Genco from investors including General Atlantic, Goldman Sachs, Morgan Stanley, Everstone and Norwest. According to a global consultancy firm Ernst & Young (E&Y), sectors such as power and transportation, consumer and branded products, infrastructure ancillaries, education and financial services, and healthcare are likely to witness increased PE activity in 2011. Deals

India Inc announced merger and acquisition (M&A) deals worth a record US$ 55 billion in 2010, including a record number of billion-dollar transactions. 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 in 2010, the highest seen in any year. Fund-raising activity gained pace by almost 65 per cent in 2010 as compared to 2009. In real terms, 27 funds were able to raise US$ 13 billion as PE as against US$ 8 billion by 22 funds in 2009. There has also been a more than 80 per cent growth in PE and VC investments in India: 2010 witnessed 348 deals worth $8 billion, against 317 deals worth $4.4 billion in 2009, according to VCCedge data. 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. As analyzed by Venture Intelligence, private equity firms obtained exit routes for their investments in a record 121 companies during 2010, including 24 via IPOs. (2009 had witnessed 66 liquidity events including 7 via IPOs). PE-backed companies raised about US$ 2.20 billion via IPOs during 2010.

The Indian Life Insurance industry is one on the strongest growing sectors in the country. Currently a US$ 41-billion industry, India is the fifth largest life insurance market and growing at a rapid...
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