The Indian mutual fund industry remains highly underpenetrated. India's AUM-to-GDP ratio is around 14% as against a global average of 75-80%. The equity AUM-to-GDP ratio is a meagre 5%.
However, the situation is likely to change in the years to come. Brokerage firm CLSA India expects the equity AUM to grow 18% every year between FY 2022 and FY 2025 and reach Rs. 30 lakh crore from Rs. 13 lakh crore as of January 2022.
The firm said that 18% equity AUM growth is expected to be driven equally by market returns and SIP flows. "Our expectation of 18% equity AUM growth is driven by 9% market return and 8% SIP flows," it said.
The debt segment is likely to see a yearly growth of 18% in the next three financial years, as per CLSA. The AUM of debt funds (excluding liquid funds) is likely to touch Rs. 14 lakh crore in FY 2023 from Rs. 9 lakh crore in FY 2021.
CLSA said it's bullish on the Indian mutual fund industry due to the following factors:
Rising inflows: The asset management industry has benefitted from strong equity inflows (ex-arbitrage) of Rs. 1.6 lakh crore between April-December 2021. SIP inflows are constantly increasing and coupled with good market returns, the AUM has grown 36% during the period, said CLSA.
Low penetration: The firm says under-penetration presents a long runway of growth for mutual fund players.
