The country’s mutual fund (MF) industry doubled its assets under management (AUM) in four years to touch the landmark figure of Rs 50 lakh crore in December 2023. The number could double by 2030, as per a report.
According to the report, the industry AUM is anticipated to double to Rs 100 lakh crore by 2030, which implies a compound annual growth rate (CAGR) of 14%. Earlier, the MF industry took five years to double its AUM from Rs 12 lakh crore to Rs 25 lakh crore. In this regard, digitisation has played a crucial role in driving the numbers in terms of investors.
The trend will gain traction given the better profile of returns that equity AUM has generated for retail investors relative to overall AUM across traditional investment instruments, as per the report.
The report mentions that the numbers will receive a fillip through retail participation with a rise in savings. Assuming a nominal Gross Domestic Product (GDP) growth rate of 11% CAGR over 2023-30, the report expects household savings to rise at a similar pace until 2030.
Retail participation in MFs has witnessed a spike from 45% in the financial year (FY) 2016 to 60%.
On a growth trajectory
MF penetration in the country is about 15% of the GDP. This is far below the global average, which stands at 74%. This underscores the huge scope for growth in the MF landscape.
Equity AUM remains dominant in the MF industry, with a 56% share in the total AUM as of December 23, as opposed to about 30% in FY16. Equity with ETFs together comprise 70% of the total AUM. SIP has emerged as a strong mode of investment of equity AUM, with an average ticket size of Rs 2,300.
The report states that with 4.2 crore unique investors, MF covered less than 5% of the working-age population. Moreover, it is at a low ticket size – monthly systematic investment plans (SIPs) average Rs 2,300, thus providing enough scope to grow.
Key players are anticipated to maintain their dominance, driven by their strong distribution franchise. The top eight asset management companies (AMCs) or fund houses currently manage 73% of the industry AUM.
Overall, AUM has witnessed a jump of 20% in CAGR (FY14-24E), while equity AUM has experienced a sharper rise of a CAGR of 32% over the past 10 years (FY14-24E). A much sharper rise was witnessed in the equity AUM since FY19, when equity AUM surged from Rs 10 lakh crore to Rs 29 lakh crore in 45 months.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
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