India market boom makes analysts scarce, costly

By Swati Bhat

MUMBAI (Reuters) - Indian fund managers and brokerages face a severe shortage of analysts as talent is snapped up by big-spending foreign firms lured by a four-year bull run in the local stock market.

International financial firms are paying analysts twice as much as their domestic peers, people in the industry say, with smaller brokerages worst hit as they are squeezed by higher wage bills and falling commissions as Internet broking grows.

"Foreign players come with a huge capital and a capacity to sustain losses for three to five years," said Nirmal Jain of India Infoline, a financial services firm.

Global houses such as Morgan Stanley (MS.N), Lehman Brothers LEH.N, Goldman Sachs (GS.N) and Credit Suisse (CSGN.VX) have been ramping up operations in India, while others like German insurer Allianz (ALVG.DE) have said they may launch asset management services in India.

Last month, JPMorgan (JPM.N) hired equity analysts away from Citigroup (C.N) and local brokerages Kotak Securities and Stratcap Securities.

Local brokerages are forced to pay top dollar to fight back.

India Infoline (IIFL.BO) last month paid 440 million rupees ($10.8 million), nearly twice its January-March quarterly profits, in joining bonuses for four senior executives from CLSA.

Salaries for analysts with up to 10 years experience have nearly trebled in the last three to five years, said Vasudeo Joshi, head of institutional equities at Man Financial.

But that has not deterred foreign firms, for whom Indian analysts are relatively cheap as their salaries are below international levels.

Fund managers in India, on the other hand, are paid almost as much as their counterparts in Hong Kong.

Salaries of Indian bankers and fund managers have been on the rise for several years but the rate began accelerating last year.

LOWER THAN HONG KONG

Experienced analysts in India now earn 2-4 million rupees ($50,000-$100,000) a year, twice as much as they earned three years ago, but only a fraction of the compensation packages for senior analysts at major brokerage houses in Hong Kong, who make $400,000 to more than $1 million in some cases.

At the entry level, annual salaries in India have doubled to between 300,000 and 500,000 rupees in three years but are still far below Hong Kong, where the total compensation can be as much as $150,000-$175,000, industry players say.

Demand for analysts has soared in step with the stock market boom, which saw India's main index .BSESN rise 73 percent in 2003, 13 percent in 2004, 42 percent in 2005 and nearly 47 percent in 2006. It is up 5 percent so far this year.