Mutual funds AUM in India abysmally low at 11% of GDP versus 100% in US; stellar growth on cards?

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Published: January 9, 2019 5:08:24 PM

Even as mutual funds asset base continues to swell in India on the back of robust inflows, experts point out that the total AUM is still very low at about 11% of the country’s GDP, and there is a possibility of stellar growth going forward.

India lags behind most major nations of the world in terms of AUM of mutual funds as a percentage of gross domestic product (GDP) at just 11% versus the world average of about 62%.

Even as mutual funds asset base continues to swell in India on the back of robust inflows, experts point out that the total AUM is still very low at about 11% of the country’s GDP, and there is a possibility of stellar growth going forward. Notably, India lags behind most major nations of the world in terms of AUM of mutual funds as a percentage of gross domestic product (GDP) at just 11% versus the world average of about 62%. Interestingly, United States has mutual fund as a percentage of AUM at 101%. Highlighting the figures for various countries, Nilesh Shah of Kotak AMC tweeted that MF AUM as a % of GDP for US is at 101%, France at 76%, Canada at 65%, Brazil at about 59% and UK at 57%.

Taking stock of the stellar inflows into mutual funds of late, SEBI Chairman Ajay Tyagi said in the recent AMFI Summit that the inflows have doubled over the last five years. “Despite such impressive growth figures, the fact also remains that AUM accounts for only 11 % of the GDP. Corresponding figure in the US is around 100 %. Naturally, the fund industry in India has a lot of catching up to do,” he noted.

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While the penetration remains low, mutual fund inflows are set to touch Rs 100 lakh crore by 2025, according to a report. “The country’s mutual fund industry will touch Rs 100 lakh crore mark by 2025 as there is very low penetration of the product among people,” Mahindra AMC Managing Director and CEO Ashutosh Bishnoi told PTI in an interview recently. Interestingly, as at the end of December 2018, month end average AUM of the mutual fund industry stands at Rs 22.85 lakh crore. Notably, the AUM of the 42 mutual fund houses together has grown to Rs 23 lakh crore, from Rs 5 lakh crore as on March 2008, which is about four-and-half-fold jump in a span of 10 years. 

Interestingly, investors continue to pour money through SIPs, with inflows to the tune of Rs 8,022.33 crore coming through the route in December 2018, implying a jump of 29% on-year, data from AMFI showed. Ashish Nasa, Head of Wealth Management, NRI and Relationship Banking at Equitas Small Finance Bank notes that SIPs have become akin to Recurring Deposits in popularity.

“From a largely unknown instrument, it has now become a household name – as popular as probably RDs (Recurring deposits) a decade ago. If data from Banks is put in public domain, it may not be surprising that SIP growth rates could be even higher – and why not – after all they are tax efficient, well-diversified and offer higher potential returns (although with higher volatility),” Ashish Nasa told FE Online recently.

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