The year began with lots of uncertainty, however the continuous fiscal and monetary stimulus provided by the government, helped in changing the macro outlook for the economy, mutual fund industry and capital market in general substantially. While the mutual fund industry grew the fastest during the year 2009 in terms of overall assets under management which reached a new high, it also faced with regulatory changes that can be considered a game changer for the mutual fund industry. Though the industry registered modest growth in equity scheme assets, investors confidence continued to go up in mutual fund products post the 2008 financial market crisis. This was reflected in the growth of the mutual fund industry and level of transparency the industry has brought in to investors. There is no doubt that the removal of entry load has brought in a big change for advising community in terms of making them charge their customers on the basis of advise provided by them. However, historically any such change that benefits the ultimate customer has only made such initiatives create a long impact which could be of permanent in nature from the point of solid, sustainable growth.
Industry also had the blessing of the regulator in terms of making mutual fund products available through stock exchange platform. This platform would add strength to the current existing distribution platform done through banks, IFAs, national and regional distributors.
During the year, the biggest boon in the political arena came when UPA government got decisive majority for the forming the Government. The political mandate gave the necessary filip in terms of boosting confidence to Global investors as well as overall growth outlook for the country as a whole in the years ahead. At the same time, Indian capital market too witnessed a lot of regulatory intervention post Satyam debacle, which raised a big question market on the Indian Inc corporate governance. However, the speedy intervention of Government and other regulators have raised the credibility of India Inc above par by bringing back the confidence in the Indian capital market. As a result of Satyam debacle, lots of disclosure became mandatory which enabled investors and shareholders to be in a position to take informed decisions.
The year ahead
I would say given the current confidence and so much to be done from the point of building Infrastructure in the Country, there is a strong case to look beyond 2010. Last one decade, MF industry have not only grown in size, it has become more and more competitive, generated wealth for investors even in a volatile environment. This is the power compounding which the India Inc offers to its Shareholders and Investors. We believe 2010 would be year where we could witness accelerated spending by Government towards building infrastructure. We might also witness lots of initiatives towards reforms which could have long lasting effect in making Indian Economy more powerful. At the same time, Government would have tough challenge in terms of raising revenue, therefore, someone will have to pay for the growth. There is a high probability tax regime could do that trick. From the Mutual industry point of view, the focus areas will continue to remain increasing investor education, enhancing penetration, increasing systematic investment plans and potentially leveraging NSE and BSE platform to reach out to the 95% of the population who have not benefited from wealth creation opportunities offered by mutual funds. We also believe there will be reversal of recent stimulus, but this in our view shall be gradual and contingent upon significant investment lead demand for funds from the Banking system. We also believe and wish that with rising wealth in semi urban and rural areas across the country, the farming community in particular would be looking at channelizing their savings into capital markets through the mutual fund vehicle.
?Author is CEO Birla Sunlife Asset Management
