DPs, custodial business on FIIs' radar

With the economy booming and domestic market scaling fresh peaks, foreign investors are seeing huge opportunities in two avenues - depository participants (DPs) and custodial services businesses.

Leading overseas players in the DP business such as HSBC, Bank of New York, Citicorp and State Suise Bank are looking for suitable local partners. It is learnt that foreign investors are in talks with some frontline players such as IL&FS, Karvy and HDFC Bank.

Custodial services is another lucrative business area where international investors are seeing a fortune. In the country, this business - in which custodians maintain shares and other records of institutional investors - is dominated by foreign banks such as Citibank, StanChart and Deutsche Bank, which largely serve overseas clients.

There are also strong domestic players such as Stock Holding Corporation of India (SHCIL) and IL&FS. IDBI is already in the news as it is believed to be on the lookout for a buyer for its stake in SHCIL.

The country has more than a million demat accounts and is expected to grow at a much faster rate than expected. Thus, vast opportunities are being created in the form of demat accounts relating to commodities and other savings instruments. And, the real fortune is likely to emerge when new futures and options products are launched.

The markets regulator, the Securities and exchange Board of India, has already decided to form a committee to look into F&O products. Introduction of delivery-based settlement in the F&O market and short-selling by institutional investors will require an automatic lending and borrowing mechanism - the service that custodians can provide. Physical delivery in options and long-term options contracts are being mulled.

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Leading overseas players in the DP business such as HSBC, Bank of New York, Citicorp and State Suise Bank are looking for suitable local partners

It is learnt that foreign investors are in talks with some frontline players such as IL&FS, Karvy and HDFC Bank