Mutual fund assets set to hit Rs 20 lakh crore by 2018

NEW DELHI: Despite the global headwinds, retail investors are shopping in a big way via the mutual fund route, and the industry is set to touch Rs 20 lakh crore asset base in the next three years.

Total assets under management or AUM of the mutual fund industry are expected to cross Rs 20 lakh crore mark by 2018 from Rs 12 lakh crore, or roughly 10 per cent of India's GDP, which stands at $2 trillion, according to a report.

Faster growth is backed by factors such as low penetration, a sound macroeconomic environment and favourable demographics, according to a joint report by EY and Cafemutual.

It is difficult to comment if AUM could touch the Rs 20 lakh crore mark or not, but it looks reasonable and very mush possible, Dinesh Khara, MD & CEO, SBI Mutual Fund, said on the sidelines of Cafemutual Confluence 2015.

The India mutual fund industry is in a sweet spot with all the enabling ingredients in place. Strong fundamentals of the economy helped cushion the Indian financial markets (including mutual funds) during the global financial crisis.

If we just look at the SIP or systematic investment plan, which has increased multiple times, it only shows that investors are maturing, Anup Bagchi, MD & CEO, ICICI Securities, said on the sidelines of the Cafemutual Confluence 2015.

This is evident from the fact that fund managers continued their shopping spree in August, purchasing shares worth a staggering Rs 10,533 crore even though overseas investors or FIIs pulled out a record amount of money from the stock market.

This was the 16th consecutive month when mutual funds were net buyers of equities.

Latest data showed fund managers bought shares worth a net Rs 10,533 crore last month while foreign portfolio investors (FPIs) took a record Rs 17,434 crore off the table during the period.

This is an all-time high net outflow by FPIs since 1997, said a PTI report. In October 2008, FPIs offloaded a net of Rs 15,347 crore from the market in the aftermath of the Lehman Brothers collapse, which triggered the global financial crisis.

Since 2008, AUM of the Indian mutual fund industry has grown at a CAGR of 16.84 per cent, outpacing the global average of approximately 8.8 per cent in the same period, said the report.

The report also highlighted that there lies a significant opportunity to channel household savings, which are only at Rs 11.7 lakh crore into capital markets.