The assets under management (AUM) of India’s mutual fund industry are forecast to increase to Rs 100 lakh crore over nine years on the back of greater penetration and the trend of growing one’s savings beyond conventional modes.
While AUM is the total market value of the investments that a fund house is holding on behalf of its investors, data show that it took almost 50 years to add Rs 10 lakh crore. However, after 2014, there has been rapid growth and the trend is only expected to continue.
Analysts at ICICI Securities said in a note that key regulations such as discouraging mis-selling, removal of entry load, introduction of direct schemes and additional commission for distribution in the smaller cities have helped.
The brokerage forecasts that AUM is likely to grow to Rs 45 lakh crore by 2025 and Rs 100 lakh crore by 2030. This is assuming a nominal GDP growth of 9 per cent over the next decade, a net inflow of 1.1 per cent of GDP into mutual funds and an average performance of 8 per cent.
“The absolute growth of Rs 24 lakh crore (in AUM between 2011-20) was equally contributed through flows and performance. We expect the theme of financialisation of savings to continue hereon because of lower returns offered by other asset classes such as bank fixed deposits and real estate. Our macro model suggests that the Indian mutual fundAUM is expected to grow at 15 per cent CAGR (compounded annual growth rate) between 2019-20 and 2029-30,” the brokerage added.
It added that the mutual fund penetration ratio (AUM to GDP) is significantly lower at 11 per cent compared with a global average of 55 per cent, which leaves enough opportunity for strong growth.
