BlackRock, Jio Joint Venture Causes Drop In Indian Stock Market

  • Jio Financial and BlackRock announce a joint venture for asset management in India.
  • Reuters reports an initial investment of $150 million each from both companies to go towards the venture.
  • Indian market is concerned over potential disruption by JFS with a low-cost strategy in asset management.

On July 26, India’s Jio Financial Services (JFS) led by Reliance Group announced that it is forming a joint venture with the US investment management firm BlackRock to power asset management services in India. On Wednesday, Jio Financial issued a statement indicating that both companies aim to make an initial investment of $150 million each into the new venture. JFS CEO Hitesh Sethia noted,

Jio BlackRock brings BlackRock’s deep expertise and talent in investment management, risk management, product excellence, access to technology, operations, scale, and intellectual capital around markets, while JFS contributes local market knowledge, digital infrastructure capabilities and robust execution capabilities.

The announcement follows the recent demerger of Jio Financial Services from Reliance Industries. The market valuation of the venture stands at approximately $20 billion, even though it has yet to establish its presence in India’s rapidly expanding financial services sector. In recent years, India’s asset management industry has experienced significant growth, with total assets under management reaching $540.4 billion.

However, there is a prevailing concern in the market that if JFS decides to adopt a strategy similar to what they did in the telecom industry, entering the asset management sector with extremely low costs, it could potentially disrupt the established players and create competition in the market, suggested Amit Kumar Gupta, the founder of Fintrekk Capital.

Additionally, following JFS and BalckRock’s joint venture announcement, the shares of several asset management companies including HDFC Asset Management, UTI Asset Management, and Aditya Birla Sun Life AMC experienced a decline in values, falling by approximately 0.75% to 2%.

BlackRock has made a number of headlines in the last few weeks with its entry into the digital assets market. Yesterday, experienced Bitcoin trader Michael van de Poppe expressed that BlackRock’s planned Bitcoin exposure plays a vital role in crypto’s future growth. Citing a report by BlackRock analysts, Poppe highlighted that an optimal risk portfolio should consist of 84% Bitcoin.

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