[ D O M E S T I C S U R V E Y | I N D I A ]
Buoyant and busy
The domestic custody services market in India is benefiting from inflows to institutional investment vehicles, while providers are maintaining their reputation for impressive levels of service.
The potential that India offers investors, both local and foreign, is well recognised. Since late 2017, the Indian economy has recorded an impressive acceleration in growth, posting a rate of 7.7 % for Q1 2018, though overall for the year to 31 March, it was 6.7 %, down 0.4 percentage points from the previous year. Performance of equity indices continued to attract investor attention. At the time of last year’ s survey, the India SENSEX Stock Market Index had reached an all-time high of 31,430.32. This year, at the time of writing, it stands at 35,622.14. A sustainable flow of domestic money has fed the mutual fund and alternative investment fund sectors( AIFs). Indian mutual funds have seen rapid growth in Assets Under Management( AUM). Total AUM of the industry increased 25.79 % year-on-year to hit a record US $ 342.91 billion at the end of February 2018. At the same time, the number of mutual fund equity portfolios reached a record high of 2.27 billion in February 2018. The custody industry has clearly benefited from this. Meanwhile, the Securities and Exchange Board of India( SEBI) has authorised existing mutual fund schemes to participate in the derivatives market. It has also permitted mutual funds, alternative investment funds( AIFs) and portfolio managers, operating in International Financial Services Centres( IFSC), to invest in securities issued by companies incorporated in India in addition to the existing list of permitted securities. The IFSC saw the two leading Indian exchanges commence operations through international exchanges offering global products, trading 22 hours a day and US dollar.
Survey results This year marks the fourth Survey of domestic custody services in India. While overall standards remain high, scores in
FIGURE 1: SERVICE AREA SCORES
Service area Average 2018 Average 2017 Difference
Relationship Management and Client Service |
6.19 |
6.57 |
-0.38 |
Cost and Value Delivered |
6.00 |
6.33 |
-0.33 |
Settlement and Cash Management |
6.13 |
6.54 |
-0.41 |
Asset Servicing |
6.16 |
6.49 |
-0.33 |
Special Operational Requirements |
6.14 |
6.49 |
-0.35 |
Operational Reporting |
6.02 |
6.46 |
-0.44 |
Technology |
5.96 |
6.31 |
-0.35 |
Fund and Unit Accounting and Valuation |
6.07 |
6.43 |
-0.36 |
Trustee and Administration Services |
6.01 |
6.38 |
-0.37 |
Reputation and Asset Safety |
6.33 |
6.58 |
-0.25 |
OVERALL WEIGHTED AVERAGES |
6.12 |
6.48 |
-0.36 |
FIGURE 2: RELATIVE PRIORITY SCORES
Service area Priority 1 or 2(%) all categories have dropped this year by between 0.25 and 0.44 points. Apart from Technology at 5.96, they are all nevertheless in Very Good territory( 6.00-6.99). Figure 1 shows the average scores across the survey in each of the 10 service categories. According to Figure 1, Reputation and Asset Safety is once
Rank 2017 Priority 6-10(%)
Relationship Management and Client Service |
46 |
2 |
14 |
Cost and Value Delivered |
32 |
3 |
21 |
Reputation and Asset Safety |
27 |
1 |
42 |
Settlement and Cash Management |
26 |
4 |
19 |
Fund and Unit Accounting and Valuation |
13 |
8 |
48 |
Asset Servicing |
13 |
7 |
39 |
Technology |
9 |
6 |
54 |
Trustee and Administration Services |
7 |
5 |
63 |
Special Operational Requirements |
6 |
10 |
62 |
Operational Reporting |
5 |
9 |
49 |
again the highest scoring category, though at 6.33, it is down 0.25 points on last year. At this level, however, the fall has little significance, since the perception of this service category remains above the threshold for Very Good. In terms of relative priority in selecting a service provider, this category has
58 Global Custodian Summer 2018