Regulatory changes in India have affected the issuance of structured products more than the investments themselves, according to Vivek Sharma (pictured), head of South East Asia and Middle East global asset management and former head of structured products and investment advisory at Edelweiss. "Pending some of these adjustments, the overall growth of the industry is going to remain subdued," said Sharma.
Capital protection remains the main driver of activity in Indian retail structured products, partly due to the country's pricing environment, which is "very conducive to the combination of high rates and volatility", but also the attraction of two- to three-year tenors due to the beneficial taxation of investment products with a tenor of more than one year, according to Sharma. "The larger offerings have been linked to broader equity benchmarks, such as the Nifty 50," said Sharma.
"Higher interest rates and volatility are providing better participation in the structured products market here," said Sharma. "However, the Indian structured products landscape is still very limited from a product point of view. Popular global offerings, such as forex, commodities and rates, are limited here [and] even equity underlyings are limited to indices and large capital stocks. Additionally, global equities are missing from an offering point of view."
The story is different for private wealth and corporate investors, with an increasing amount of ultra-high net worth individuals and certain treasuries using structured products to "express market specific views through specific underlyings which are not necessarily limited to broader benchmarks", according to Sharma.
The company intends to expand its range of actively-managed certificates as well as equity offerings, according to Sharma. "Edelweiss is very positive on range accruals and actively-managed certificates on different equity underlying," said Sharma. "Our ability to identify trends and create opportunities on an ongoing basis is a big advantage, as is our execution platform and client handling, and ability to adapt to new regulation and governance."
Edelweiss' 252 private banking products worth INR14.4bn (US$222m) maturing between February 1, 2017 and January 31, 2018 were wrapped as negotiable certificates of deposit, according to the company. About 62% of these products were linked to the CNX Nifty Index (157 products), with other preferred underlyings including the Nifty 50 index (59 products) and the Nifty Bank index (18).
Related stories:
Indian investors prefer stocks and leverage, Edelweiss
Autocallables continue to deliver while principal protection is also in vogue, SRP Apac
Edelweiss: India has the ingredients and appetite for a strong structured products market