The Indian mutual fund industry has grown at an impressive rate in the last few years. There are various factors contributing to this growth. Some of the reasons are increasing customer awareness, educational campaigns (Mutual Funds Sahi Hai, for instance), falling interest rates (although a reverse swing has just begun) which have driven investors away from the traditional investment options like fixed deposits, digital investment options (like new-age mobile apps) and regulatory changes (such as easing of the KYC requirements.)
The mutual fund space is definitely changing for the better. This is better for all stakeholders with investors at the top of the beneficiary pyramid. Evolving regulations, increasing industry participants, high quality expansion of product suites and the rise of digital distribution channels are key factors to this change. These factors will culminate into a robust mutual fund investing ecosystem with more investors and more informed investments
The industry is also witnessing many new innovations in manufacturing as well as distribution. While older and dominant players have a full suite of product offerings, the new entrants seem to have a focused approach. The newly launched Navi AMC seems to be cementing its position as a strong passive-only fund house. White Oak Capital (which launched its maiden NFO in July’22), which acquired YES AMC’s assets, is likely to draw upon its active fund management expertise while offering investors a renewed experience. Another example is that of NJ AMC, which can be expected to benefit from its strong distribution capabilities.
The Mutual Fund industry is seeing new entrants, which are adopting a technology-driven approach to disrupt the industry. With more investors, innovation, evolving regulations and new entrants coming into the mutual fund space in India, the industry is changing and witnessing growth in terms of penetration and investors.
With Mutual fund assets under management touching Rs 40 lakh crore, and more and more retail investors (retail folios now just shy of 100 million) realising the merits of investing in mutual funds, this industry is all set for more tech innovations, new players and consolidations.
Major players such as Aditya Birla Sun Life, Kotak, SBI, ICICI, Axis, HDFC, and UTI, among others, account for over 80% of market share in the industry. But with new players coming in, the future of MF will be competitive and these players, including foreign AMCs, will compete to gain greater market share
Of course, consolidation is also happening with old fund houses giving way to new players. Recently, HSBC acquired L&T’s MF business and this strategic deal is said to help HSBC get access to smaller cities. Also, apart from top players, Asset Management Companies (AMCs) including Quant Money Managers, PPFAS Asset Management and PGIM India Asset Management are registering strong growth in assets, indicating that the industry is growing and welcoming new players who drive the ecosystem with technological advancements.
As the industry grows in size, it is expected to see increased attention from regulatory bodies, working towards protecting the interest of the customers. In addition to it, a larger push from the state towards financial inclusion and retail participation in the markets is expected to bring about changes in taxation pertaining to Mutual Fund products. These two factors together are expected to drive AUM growth across asset classes in the next few years.