Indian Mutual Funds Industry

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11 August 2009


The total assets under management in the Indian mutual funds industry will grow at a CAGR of 27% in the next five years from US$150 billion as of March 2009. A very high household savings rate and low retail penetration make the market a target for foreign asset managers.

In a new report, Indian Mutual Funds Industry, Celent provides a comprehensive overview of the mutual funds market in India. The Indian market is highly concentrated, with the top seven asset management companies controlling 70% of the market. Private players saw their market share increase from 3% to 30% between 2000 and 2008, while dominance of UTI and bank-sponsored mutual funds declined from 77% in 2000 to only 18% in 2008.

"Despite a decline, the UTI and bank-sponsored funds have established a strong distribution network in tier 2, 3 cities and in the rural areas," says Arin Ray, Celent analyst and coauthor of the report. "This provides a unique opportunity for retail-focused asset management companies entering the market to either buy a stake or establish a relationship with these fund houses."

Banks, distributors, and independent financial advisors are the main channels of distribution in India, each accounting for around 30% of the total. Online sales of mutual funds account for 5–7% of total distribution. New regulations regarding removal of entry load for direct buying of mutual funds as well as the creation of a common online platform for trading in mutual funds are likely to increase the share of online distribution.

"The role of the distributor will change to a more sophisticated advisory function," says Sreekrishna Sankar, Celent analyst and coauthor of the report. "However, the limited training and education available to the distributors, as well as attractive alternative of higher distribution fee income for selling insurance products, might be a cause of concern."

This report analyses the evolution of the Indian mutual funds industry, examining industry dynamics, performance, fee structure, and cost analysis of the main market players, investor segment characteristics, distribution channels, product trends, and the regulatory environment. It also provides a comparison of the mutual funds industry in India with developed markets in the US and Singapore as well as a growing market like China.