India’s big-bang financial reforms target wave of foreign money

Core Insights - The Indian government has passed a bill allowing up to 100% foreign ownership of insurance firms, addressing the industry's under-penetration and capital shortages [1][19] - Reforms are aimed at attracting foreign capital, especially in light of recent tariffs imposed by the US on Indian goods, which have impacted exports and manufacturing ambitions [2][3] - The reforms are expected to enhance global investor sentiment and increase foreign investment flows, creating more opportunities for banks and financial institutions [3][7] Insurance and Pension Sector - The new legislation allows full foreign ownership in the insurance sector, which has been capped at 74% previously, signaling a shift towards deregulation [8][19] - The pension fund sector, valued at $177 billion, will also see a similar shift towards 100% foreign ownership, enhancing investment flexibility [9][19] - Major global firms like Allianz SE, Axa SA, and Nippon Life Insurance Co. are expected to benefit from these changes, allowing them to scale up investments [8][19] Foreign Direct Investment - India recorded a net foreign direct investment of $7.6 billion from April to September, more than double the previous year's rate, indicating a growing appetite for Indian assets [7][19] - Recent deals, such as Mizuho Financial Group's acquisition of a controlling stake in Avendus Capital, highlight the increasing interest from foreign investors [6][19] Market Dynamics - The total volume of transactions targeting Indian firms has increased by 15% this year, reaching nearly $90 billion, with significant involvement from Japanese buyers [12][19] - Indian firms have raised a record $22 billion through initial public offerings in 2025, showcasing a booming capital market [14][19] - Despite the positive reforms, the Nifty 50 Index has only risen by 10% this year, and foreign investors have withdrawn approximately $18 billion from equity markets [17][19] Regulatory Changes - The Indian securities market regulator has implemented significant changes to reduce fees for domestic mutual funds, aiming to enhance trading activity [15][19] - State-run banks are now allowed a more active role in funding mergers and acquisitions, enabling them to compete more effectively with foreign counterparts [13][19] Economic Goals - The reforms are part of a broader strategy to make India a developed economy by 2047, requiring an annual economic growth rate of about 8% [1][19] - The government is also focusing on rapid industrialization and deeper capital markets to achieve its economic targets [1][19]