Analysts pick HDFC AMC, CAMS, KFin as top bets as MF growth accelerates

Analysts are increasingly optimistic about the long-term growth of India's capital markets, identifying HDFC AMC, CAMS, and KFin Technologies as top investment picks due to a structural shift in household savings towards financial instruments and anticipated multi-year earnings expansion.

A structural shift in household savings from physical assets to financial instruments is making analysts increasingly optimistic about the long-term growth outlook of the capital markets sector.

They expect market infrastructure providers and asset management companies (AMCs) to see multi-year earnings expansion.

“Over the past decade, the assets under management (AUM) of the Indian mutual fund (MF) industry has scaled from Rs 12.3 trillion in 2015-16 to Rs 73.7 trillion in 2025-26 (FY26) — a 20 per cent 10-year compound annual growth rate (CAGR).

"Looking ahead, the industry stands at a compelling inflection point, with structural tailwinds poised to sustain its growth momentum,” said analysts at Emkay Global Financial Services in a sector initiation report.

Driving Factors for MF Growth

A surge in retail participation, facilitated by digital transformation and a deepening investment culture, is set to transform the sector into a high-conviction play for institutional investors in the years ahead.

“We expect the Indian MF industry to deliver an AUM CAGR of about 17 per cent over the next decade, reaching Rs 309 trillion by 2034-35, driven by healthy net inflows on the back of deepening investor penetration and improving stickiness,” the brokerage said.

Multi-Decade Runway for AMCs

According to Emkay Global, Indian AMCs are among the most efficient proxies for the institutionalisation of Indian wealth.

They are witnessing a “secular megatrend catalysing sustained AUM growth”.

This is because the democratisation of investing is now deeply entrenched, with systematic investment plans (SIPs) acting as a “sticky and granular automated engine” for the markets.

In March 2026, inflows via SIPs hit a record Rs 32,000 crore.

This steady flow of domestic capital provides a stable valuation floor, allowing Indian AMCs to command higher multiples than global peers, supported by “strong brand equity, wide distribution, growth visibility, and superior profitability”.

“The mass democratisation of retail investing — bolstered by digital capabilities — has fuelled rapid growth in MF AUM, with retail investors (including high networth individuals) contributing about 60 per cent to total AUM as of the third quarter (October–December/Q3) of FY26.

"The industry is shifting from episodic market timing to disciplined long-term wealth creation,” the brokerage observed.

Emkay Global maintains a bullish stance on high-quality AMC franchises with scalable, capital-light models.

It has initiated a 'buy' rating on HDFC AMC (target price Rs 3,200), ICICI Prudential AMC (Rs 4,000), and Nippon Life India (Rs 1,150). It has assigned an 'add' rating to Aditya Birla Sun Life AMC and UTI AMC, with target prices of Rs 1,150 and Rs 1,100, respectively.

Challenges and Profitability Outlook

While the asset management business has a highly scalable fixed-cost base, it faces top-line headwinds, driven by the Securities and Exchange Board of India’s total expense ratio slabs and the fast-growing, low-yield passive segment.

“However, operating leverage is likely to partly offset the dilution in revenue yields.

"Thus, profitability will be led by AUM growth,” the brokerage said.

Market Infrastructure and Utility Players

In tandem with the asset management outlook, Axis Capital has initiated coverage on market infrastructure and utility players, describing them as “invisible engines” with “visible earnings”.

According to the brokerage, these entities offer a superior play on capital markets due to high entry barriers and a low-cost model that yields earnings before interest, tax, depreciation, and amortisation margins in the 40–50 per cent range.

Axis Capital noted that recent market corrections have made valuations attractive, particularly for registrar and transfer agents (RTAs), which face lower regulatory risks and benefit from revenue optionalities.

“Exchanges offer a play on India’s large equity derivatives market and an indirect play on the long-term nominal gross domestic product growth runway.

"Depositories, meanwhile, gain from rising household equity penetration and offer a more stable, diversified revenue mix.

"RTAs are a proxy for rising MF penetration, with some international optionality,” Axis Capital said.

The brokerage prefers RTAs due to better earnings visibility and reliance on stable business drivers such as SIPs.

It expects earnings growth of 15 per cent and 22 per cent for depository participants and RTAs, respectively, over FY26 to 2027-28.

It has initiated a 'buy' rating on KFin Technologies with a target price of Rs 1,200, citing its status as a high-growth play with sizeable international optionality.

Similarly, Computer Age Management Services is rated 'buy' with a target of Rs 850, positioned as a dominant proxy for domestic MF growth.

Within the depository space, the brokerage has issued an 'add' rating on Central Depository Services (India) and National Securities Depository, with target prices of Rs 1,425 and Rs 1,000, respectively.