The Hindu Business Line : Is India attractive to global investment management?

What is attracting global investment management companies to India? That question, now more than ever, has become pertinent, inviting answers from pundits too numerous to count.

We tried to sift through the various theories that are being tossed around and came to the conclusion that most of these answers are based on a few common things.

Here's our take - not the final word on the issue, but certainly a comprehensive one - on what is drawing international players to our shores.

Institutional investors, whose contribution to the MF industry's total asset base far outstrips what is on account of retail, are turning out to be an extremely powerful force in terms of their allocation to funds. Their numbers are growing, a trend that is expected to be even stronger in the days to come.

The big guns in the world of asset management will not be interested in servicing the wholesale segment alone. The retail segment too is growing larger. In fact, as someone pointed out to us just the other day, the retail story has not even started for India.

All indicators, however, tell us that the retail juggernaut will keep on trundle along. This, in a situation where interest rates are changing quite dramatically. Here, we are also talking about rise in consumer credit, changing investment habits of the small investor and the Government's perceived willingness to go ahead with financial sector reforms.

An AMC that sets up shop here needs to, at the end of the day, make money for its shareholders. But is the Indian regulatory environment helpful enough? Are the authorities ready to defend the funds community? Like others, we tend to believe that the regulator is concerned about investors, small ones included. And funds, as the popular wisdom goes, are the right vehicle for the small participant.

Mind you, today there are more signs of `internationalisation' than ever. This is getting reflected in tie-ups (witness Kotak Mahindra MF's new association with T Rowe Price) and partnerships (check out Bank of Baroda's plans with Pioneer) of various hues.

The country's 30-strong AMC fraternity (this number has remained more or less constant for a long time) is likely to see the addition of at least half a dozen players. Or so feel those who are aware of the arrival of the AIGs and the JP Morgans of the world.

It may be mentioned here that tie-ups such as these are not new for the local market. In the past we have seen joint efforts like Kothari Pioneer, ITC Threadneedle, Sundaram Newton, Cholamandalam Cazenove, Birla Capital International and Tata TD. We are sure we have missed one or two.

Incidentally, Sundaram is now with BNP Paribas and Birla with Sun Life. Tata has since gone it alone, the `ITC Threadneedle' brand does not exist and Chola has recently established ties with DBS. And, yes, the same `Pioneer' (of Kothari Pioneer fame) is readying for a venture with BoB MF.

With the stakes going higher for the Indian market - never mind little issues like last week's steep decline in equities or the fluctuations on the fixed-income front - funds are finding new takers every day. Every time the index zooms, wealth gets created. Investors know this and there is no way one can stop them.

Feedback may be sent to nilanjan@thehindu.co.in

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