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Financial services now need a second life

business Updated: Feb 16, 2009 22:04 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
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Vipin, a regular share market investor saw his stock portfolio fall by more than 50 per cent in the market fall in 2008. As he withdrew all his investments towards the middle of 2008, he has vowed not to invest in stocks again.

Arvind, a financial service provider, who had thronging mutual fund and insurance customers, is now in trouble, leading him to ask to more than half of his 10-member staff to look out for another job.

The market movement between January 2004 and January 2008 with a gain in Sensex movement from a level of 6,000 to 21,000 reflects the state of a growing economy. But it is linked to global volatilities that need to be addressed.

The financial services industry as a whole also grew significantly along with the flourishing broking industry as stock prices and corporate profits both raced up.

The assets under management of the mutual fund industry swelled from Rs 1,45,372 crore in January 2004 to Rs 5,70,876 crore in January 2008.

While the global slowdown impact on developed economies has been far more prominent, local bank liquidity and conditions have also been affected by the global crisis.

“Developing a robust and liquid corporate bond market would be a huge step in allowing companies to tap the general public for funds as against relying mainly on the banking sector plus a few institutional investors,” said Ajay Srinivasan, chief executive, financial services, Aditya Birla Group.

While optimists believe that the situation will improve significantly within the next 12 months, experts with a deeper view say it might take longer.