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S U R V E Y
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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.
T
he potential that India offers
investors, both local and foreign,
is well recognised. Since late 2017,
the Indian economy has recorded an im-
pressive 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 previ-
ous 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 sustaina ble 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 partici-
pate in the derivatives market. It has also
permitted mutual funds, alternative invest-
ment funds (AIFs) and portfolio managers,
operating in International Financial Ser-
vices 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 do-
mestic custody services in India. While
overall standards remain high, scores in
58
Global Custodian
Summer 2018
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
Service area Priority 1 or 2
(%) 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
FIGURE 2 : RELATIVE PRIORITY SCORES
all categories have dropped this year by
between 0.25 and 0.44 points. Apart from
Technology at 5.96, they are all neverthe-
less 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
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 percep-
tion of this service category remains
above the threshold for Very Good.
In terms of relative priority in select-
ing a service provider, this category has