FINANCIAL SERVICE SECTOR ANALYSIS.

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Overview: -
                      The financial service sector contributes to 36.51% of the NIFTY index of India. This is 
the major contributor to the NIFT Index. Among the NIFTY index, the service institutions like HDFC Bank (10.42%), HDFC (7.88%), ICICI Bank (5.85%) are the top contributors in the NIFTY index. The Financial service sector is one of the most sensitive sectors, where this sector can be influenced by every action around the globe directly. The fluctuations and changes in the availability of funds depend on the macro and macro-level factors in the economy.

                        India has strong diversified growth of existing financial services and new emerging financial services with the alignment of the technology. Financial services are being expended to all over its roots to the multi-functioning of the insurance, pension fund, mutual funds, NBFC(Non-Bank Financial Services), and Digital platforms also. As of now, India has 12 Public sector banks, 22 Private sector banks, 45 foreign banks, 43 Regional Rural Banks, 9small finance Banks,  5 Payment banks, and many local area banks and cooperative banks.

                        The recent changes in the regulations are making the Financial sector to be more entries like payment banks. The financial service sector includes all the activities of aids to the financial service industry.  The India Gross Domestic Savings as a percentage to Gross Domestic Product is 30.5%.  The recent changes in the Foreign Direct Investment in the Financial sector are the sign of a positive impact in the financial sector. This allows the funds in the Financial sector increase of the investment in the many sectors of Insurance and NBFC with an increased stake from foreign investments.

                        The financial sector is opening up to the integration of many factors to eliminate and minimization of the risks associated with the Borrowings. Banks are also maintaining the norms of the BASEL committee, where it will be a whole integration to the global market. The announcement of Insolvency Bankruptcy code will be a big win for the financial service sector. The operations and cooperation form the government to the financial sector are in favor of and alignment with the economic growth of the country.

                       The people in the country are being able to access the bank through the initiatives implemented by the government such as Pradhan Mantri Jan Dhan Yojana. The people are being literate in the finance and adoption of the financial institution will be a great scope for the upcoming period.  As the economy is growing the emerging need for the credit is abundant for the wholesale and retail financial markets. This can be good business opportunities for the growth of the financial sector in India.

                        In the last budget of 2019, the government of India has permitted the insurance intermediaries up to 100% Foreign direct investments. This decision makes the country to have flowed with the investments and growth of the availability of capital to the many sectors in India. The Deposits are being registered in the NBFC with the Compounded annual growth rate of 36.8%.

Analysis: -

                       In the Indian Financial sector, growth is dependent on many internal and external factors. In the case of the banks in India, it is highly sensitive to the Macro and Macro factors. Any change in the customer's perception concerning the avail of credit, the customer may borrow the available funds from the banks available or not. The customers in the country so price-sensitive oriented, The price-sensitive customers can make an easy change of their decision of services from the one financial institution to other financial institutions very quickly.
 
                       Here the main challenge being faced by every financial institution is the lack of availability of the data about the customers and their financial behavior. If a customer takes the loan from one finical institution and then after the same customer is being offered credit availability without cross-checking due to the integration of data from all the financial institutions in the country.

Major Players in the financial services industry

                       In the financial sector, the availability of funds is monitored and regulated by the central bank. The regulations and supervisory are in fairness and transparency when compare to other sectors/industries. As our economy is in the growth stage, the need for financial services and credit is abundant requirements. Hence, as the business operations expand the need for the credit to the business and the expansion of reputed financial institutions to tier 2 and tier 3 cities is required. As the people in the rural area being are also financially literate, financial institutions are having opportunities to establish their operations and grab the business opportunities in rural India.

BANK
MKT.CAP. (cr.)
P/E
P/B
EPS(TTM)
LTP
BETA
HDFC Bank
549354.06
20.16
3.04
49.7
1000.00
1.02
ICICI Bank
245958.67
25.95
2.09
14.65
379.90
1.34
SBI
169924.60
12.06
0.79
15.8
190.40
1.17


                        The competition is at an acceptable level high in the financial industry. In general, the competition in the finance industry will be internally between 2 or 3 companies, based on market capitalization. The new institution's entry is heavy process-oriented in the finance industry, due to heavy license oriented, requirement of a heavy network, and capital requirements. The market is heavily volatile in the industry as it is being monitored and regulated by the “lender of last resort”. The interest rates play a vital role in the industry and marketing the financial services and products depend on the network and the service provided by the financial institutions. In general, the industry is having a higher customer satisfaction rate from Private sector banks.

Forecast: -

                       The current outbreak has been made the customers choose without any other choice to make the transaction only through the medium of banks and financial institutions. The COVID19 is giving opportunities in the disguise to the financial sector for the growth and expansion. As people need to maintain the distancing in the upcoming period, they also refuse to take the cash due to fear of Coronavirus, this makes the customers choose digital banking without any other alternatives.
                        In the developing economy, the need for credit is high for business and retail customers. Additionally, the government also focuses on the development of the economy through encouragement of the investments, by lowering the interest rates. This can be a huge beneficiary for the financial industry to expand its services and providing credit. This is a huge opportunity to expand the market for the Financial industry players. Post-COVID 19, the remote working will be a normal part of life, this will be a huge cost benefit for the finance industry, additionally, the customer's footfall will reduce through digitalization.
Conclusion: -

                       In every industry, there will be a favor and against it. Here in the financial industry, the main challenge is to reduce and materialize the Non Performing Assets from the borrowers. Additionally, the High Networth Individuals default of loan amount will be the worst scenario and it will affect the economy as well the operation of the financial industry. The central bank should increase the monitoring and regulations over the banks. There should be complete and much more supervision in the fair and transparency reporting is essential in the industry.

                  The investment industry is directly related to the functioning and operation of the Finance industry. If any event has happened in the finance industry, it will affect the investment industry and the investors lose faith in the investment avenues. The loos of faith by the investors will ultimately lead to lower capital formation for economic growth and development. The available scope in the investment industry is huge and can be beneficial from driving through the proper directions with supervision.

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