The Indian mutual fund industry's assets under management race from Rs 3 trillion to Rs 4 trillion has come in just nine months.
The fastest-ever AUM growth shows the dominant role of private and foreign players in the domestic market, after the government opened the MF doors to the private sector in 1993.
The inflows to fixed income schemes contributed nearly 70-75 per cent of this growth, reflecting the rising retail interest in participating in the secondary market through mutual funds.
The total AUM of the mutual fund houses in the country crossed the Rs 1 trillion size in June 2003, a decade after the private sector entered the mutual fund business.
The industry touched the Rs 2 trillion mark after two years and three months in September 2005. However, the growth rate of the industry scaled in the following year, as the next milestone of Rs 3 trillion was reached after 11 months in August 2006.
"The domestic mutual fund industry has grown 50 per cent over the last year. We are witnessing a rise in retail participation, which is coming through the systematic investment plans. But, there is still a long way to go as only five per cent of the households are investing in mutual funds," A P Kurian, chairman, Association of Mutual Funds, said.
Kurian, who has been associated with the domestic MF industry since its inception, says that reaching out to untapped investors in rural India, where incomes are on the rise, would be key for the growth of the funds.
Ajay Bagga, head of Lotus Mutual Fund, observes, "The MFs could witness 5-6 times growth in the next 7-8 years, as the industry has become a globally significant
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"The industry has just crossed the $100 billion mark. Now, we are among the top 15 nations in terms of MF AUM. We could grow to $500-600 billion by 2015. This is possible as more global players are planning to set up asset management businesses here," he said.
The industry continues to be dominated by top players, as around 45-50 per cent of the total AUM is concentrated in the top five fund houses. Presently, these players have control over 48 per cent (up to Rs 2,10,500 crore (Rs 2,105 billion) of the AUM.
Jayesh Shroff of SBI Mutual Fund says: "Even though the MFs are growing, there is a long way to go. The penetration level is not very high. The funds have grown, more because the demographic profile is changing. More number of youths, whose disposable incomes have gone up, are choosing the MFs to enter the market."
Presently, around 75 per cent of the industry AUM is focused in fixed income schemes, while the rest is invested in equity.
Traditionally, corporates put money into liquid schemes and fixed maturity products, while the equity flow comes from the retail investors.
However, now the funds are looking to attract new investors by introducing products such as FMPs, which give comparatively higher returns than the bank fixed deposits.
"Many new customers are attracted through FMPs. As funds are promoting FMPs in a big way, the retail participation in FMPs has gone up. We are aiming at converting some of these investors to our equity schemes, as this will be an easier task," Ashish Nigam of DBS Cholamandalam MF said.
