Best in India: ICICI Bank

Mumbai-headquartered ICICI Bank has one of the strongest wealth management distribution channels in India, via a network of more than 3,700 branches, and has leveraged this internal distribution channel to become one of the biggest providers of structured products, in addition to selling via third-party wealth managers.

As well as coverage across the whole of India, the bank also has a sizeable international client base in the GCC (Gulf Cooperation Council) countries, Singapore and South Africa.

During the second half of 2013, there was a general global outflow from emerging markets to developed markets. Specifically in India, there was a lot of uncertainty ahead of national elections. But in May, the National Democratic Alliance led by the BJP won a big victory, with the new administration headed up by Narendra Modi viewed as pro-business. "Late last year and into 2014, our clients were very risk averse and were looking mostly at conservative structures with capital protection," says Shilpa Kumar, head, global markets group at ICICI Bank in Mumbai. "But since the elections they are more comfortable with risk, especially with Indian equities, and we have seen a pick-up on sales of equity-related structures."

Worst-of structures with a basket of three names are popular, and might typically have a two-year maturity. Even before the election, ICICI was showcasing a product with Reliance GDR, Tata Motors ADR and HDFC Bank ADR as underlyings. There is a knock-in barrier at 75%, observed only at maturity.

Between August 2013 and August 2014, the Bombay Stock Exchange Sensex Index experienced a very strong run, with 52-week high and lows of 26,300 and 17,448, respectively. But as the effects of economic reforms and higher infrastructure spending feed through to the economy, some analysts are forecasting that the Sensex will finish 2015 at around 31,000. And there are similar bullish forecasts for the National Stock Exchange Nifty 50 index.

The most popular international underlyings in India tend to be US stocks, specifically technology companies. During much of 2013, there was more of a focus on developed economies, riding the recovery in the US and some eurozone countries. Japan also featured as so-called Abenomics kicked in. "Most of the interest is in baskets of stocks rather than indexes, and we have strong in-house research and weekly calls with the structured products sales teams to agree on investment themes," says Kumar.

In September 2013, it was announced that Goldman Sachs, Nike and Visa would be added to the Dow Jones Industrial Average, a move that tends to add to new flows from mandated as well as discretionary funds tracking US markets passively or actively.

ICICI Bank moved quickly to launch a six-month high-coupon note with a conservative knock-in set at 75%, which allowed clients to take a short-tenor view on some US large-cap underlying stocks.

In late 2013 and early 2014, the bank also took advantage of fund flows from the developing markets equity and bonds towards developed markets equities. The volatility in indexes was high at the time, and so it was possible to structure a decent coupon of 8%, in spite of the underlyings being indexes, which were more stable than the individual stocks.

ICICI showcased a three-year fixed coupon with four indexes in a worst-of basket - the S&P 500, Nikkei 225, FTSE 100 and Dax. There was a conservative knock-in barrier of 50% of the initial index levels.

Of the single stocks in the US technology sector, Google, Microsoft and Facebook were also popular underlyings with Indian investors. "The bank offers a transparent and well structured range of equity products with both Indian and US exposure," says Alok Miharia, UAE-based finance controller at Darwish Bin Ahmed. "India is one of the strongest emerging markets at the moment, with the help of a clear mandate for the new government, so there is a strong Indian equity theme."

Structuring is done via the global markets group, and mass distribution is organised through local branches of the bank, with high-net-worth individuals catered for by ICICI Bank Wealth Management.

For both mass retail and wealth management, structured deposits have proved a popular format, and ICICI Bank is well placed to play the rupee versus the US dollar, including under the Foreign Currency Non-Resident (FCNR) programme.

In the second half of 2013, ICICI had a lot of take-up for its FCNR deposit accounts. Around October 2013, investor confidence had been shaken by volatility in emerging markets. Emerging markets currencies, including the rupee, had depreciated against the dollar and there was a lot of uncertainty among clients, who had become extremely risk averse.

ICICI's investors were able to place their cash in FCNR deposits and, with the help of a leverage facility offered by the bank, generate returns of 12-14%. These three- and five-year products were capital guaranteed in dollar terms if held to maturity.