Getting to grips with India’s financial ecosystem
Paul Sloane, portfolio manager, reports back from his recent trip to Mumbai.
The long-term outlook for Indian financial services is very strong, underpinned by good demographics, low penetration of financial products, and the fact that things like affordable housing are centre pieces of economic policy.
I’ve been in India to investigate further the growth prospects for companies involved in this sector. We’ve had many helpful conversations with companies, which will inform our research agenda, in our hunt for sustainable growth business models.
Positive development for banks
- The universal biometric ID system means that at the touch of a single thumbprint anyone can connect with a centralised credit bureau. This enables the poorest people in India to kickstart a detailed credit track record as soon as they enter the financial system.
- New insolvency and bankruptcy laws could be a game change for Indian banks, enabling them to take control from business owners
What we’ve discussed with Indian companies
The move to sustainable growth
There is a real difference between growth and sustainable growth. The last nine months have seen a very high-profile insolvency of an infrastructure lender and there are significant signs of stress in areas like mortgage lending.
Technology and disruption
The financial ecosystem in India is upgrading at a frantic pace. Areas like payments is seeing the system leap-frogging other countries. We’ve tried to assess from companies how the board thinks about difference between simply using technology to run a company, and using it to transform, or even reimagine the business.
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Market and currency movements may cause the capital value
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Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.
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