Stock jitters fail to deter new fund firms

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A global credit crunch and sliding Indian stocks have shaken investor confidence and hit fund flows. But they are unlikely to ease the scramble to join the booming Indian asset management industry, experts said.

Pioneer Global Investments, the fund arm of Italy's bank UniCredit and Religare-AEGON AMC confirmed to Reuters their plans to start Indian operations were on track.

"The difficult market conditions in the short term have no effect on our timetable as our commitment to India is strategic and long term," Angus Stening, chief executive, Asia & Emerging Markets Division, Pioneer Investments, said.

"We are on target for change of control of BOB AMC to take place in May subject to regulatory approval from SEBI and Bank of Italy...we have no intention of delaying any activity," he added.

Pioneer Global Investments in October last year joined hands with India's state-run lender Bank of Baroda to relaunch its Indian fund operations after an absence of nearly five years.

More than a dozen firms are now waiting to join the country's 33-member fund industry forecast to more than triple assets to $520 billion by 2015, according to the Boston Consulting Group.

But equity sell-off so far this year has seen the benchmark BSE index contract more than a fourth, wiping out nearly a third of the net asset value of domestic equity funds on an average and hitting appetite for mutual fund investments.

Existing stock funds collected 50 billion rupees in February, the lowest since September and 60 percent less than January, data from the Association of Mutual Funds in India showed.

Industry assets have risen a little over 2 percent this year as compared with over 9 percent during same period last year and response to new players has been muted.

South Korea's Mirae Asset, which launched its first Indian fund on Feb 11, the day Morgan Stanley also opened a fund after a gap of 14 years, has mopped up less than 1.5 billion rupees, similar to Morgan Stanley's collection.

"These kinds of variations in the market are bound to happen...I don't think this will by any chance change the decision of fund houses to set up shops in India," said Aditya Agarwal, joint managing director at fund tracker ICRA.

The steep fall could favour new players later as they can potentially show good performance when markets rebound, he said.

"Yes, they may slow down a little in terms of their product launches," Agarwal said, adding the long-term potential of the industry was too bright to consider small blips in stocks.

India's $140 billion fund industry saw assets rising by a robust 60 percent in 2007, attracting many global asset managers.