#6 Key Trends to Watch Out in the Mutual Fund Industry
The third largest home for startups in the country, Mumbai has many hidden gems
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
There is extremely famous term is the investment industry – "Mutual Funds Sahi Hai' (Mutual Funds are good). Indeed, chances are that the financial advising community couldn't agree less.
This outlook has helped the industry march towards a very positive trajectory. According to the Association of Mutual Funds in India, In FY 2018, the AUM was INR 24 lakh crore while during the corresponding period in the previous, the AUM was INR 20.9 lakh crore.
In fact, there has been also a steady rise in the folio creation for the last 53 months. In March 2019, total folio created was 8.25 crores.
Having said, the industry's penetration in the country is close t0 5 per cent, which as compared to markets like the US and Europe is extremely poor. The opportunity in the industry is so big that even unicorns like PayTm couldn't resist it. A lot of fintech companies have adopted the robo advisory model to cater to retail investors.
There is a growth of opportunity for players in this space are tremendous. Keeping that in mind, Entrepreneur India lists six key trends in the mutual fund industry that you can afford to miss.
Mutual fund players are very optimistic about the industry's future and expecting the AUMs to improve in FY20. Pravin Jadhav, Whole-time Director of Paytm Money expects this mass adoption will be supported by multiple factors like digitalisation and minimum investment amount.
"Lower minimum investment amount has helped increase adoption, especially among the smaller towns to explore the investment product as a better avenue for wealth creation compared to the traditional investment options. We see the majority of our investors fall in the 18-32 years age bracket, and over 70 per cent of our investors chose to invest via SIPs. This is an encouraging indicator of millennial starting their investment journey early with a disciplined approach." he shared.
Experts often dub SIP investments as the backbone of the mutual fund industry. AS per AMFI, there has been 158 per cent, from INR 3,122 Cr. in April 2016 to INR 8,055 Cr. in March 2019, in SIPs inflow.
Abhinav Angirish, Founder, Investonline.in, who thinks this data is staggering, shares that, "With increasing per capita income at a CAGR of 9.7 per cent in the last 5 years and an expected same pace for the future, SIP investments would do wonders for the mutual fund industry."
Other factors will play to have an impact on the growth of the industry is a string of regulations that have reduced the total expense ratio of funds and the revenues of distributors and IFAs will exert downward pressure on retail flows.
"Rise of digital and adoption of various online platforms by investors with the regulatory pressure on the distribution business (online and offline) will determine the growth of the industry for the next 2-3 years," noted Srikanth Meenakshi, co-founder and COO, FundsIndia.com.
India is also becoming the most favoured equity market among foreign investors. Angirish from Investonline.in says that in March 2019 the Indian equities saw FII inflows of INR 23,000 crore which is the highest in the last two years.
"It was also the reason behind the 7per cent rise in the Indian Equity indices. These inflows would promote growth in the market, which eventually support the past growth for the MF industry in the coming years," he added.
Apart from the mass adopting among retail in investors, ground level economics are also supporting the industry.
Ankur Choudhary, co-founder & CIO Goalwise, "The main trend driving the inflows currently is a combination of low-interest rates, sluggish real estate sector and increasing investor awareness."
The country is presently witnessing general elections and several states will soon observe assembly election. The elections' result will have a direct impact on the industry.
Meenakshi says, "A potential market stabilizing outcome from the elections could lift investor sentiment and provide the impetus for the market as well as inflows into funds."
Will election dampen the mood or lift it, we need to watch out for the results.