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Addressing FICCI’s 20th Annual Capital Markets Conference, Amarjeet Singh, Whole Time Member of SEBI said that mutual funds have clearly emerged as game-changing vehicles in the investment landscape today.
Over the last ten years, the AUM has grown more than 5.5x to reach Rs 46 lakh crore as on September 2023. Notably, this forms around 16% of GDP as against close to 7% which was 10 years ago. In terms of geographical mix, the AUM of B30 cities increased from 16% to 18% in the last four years.
Also, there has been a greater retail participation in two and a half years where the number of unique investors went up from over 2 crore to more than 4 crore, a CAGR of 17%.
Elaborating further, Amarjeet said that SIPs have been instrumental in attracting investors and creating a shift from a very conservative recurring deposit to a more attractive wealth-creation tool.
Interestingly, he also spoke about the key drivers that will determine the growth in the MF industry from here on and touched upon the potential that the industry holds.
Key growth drivers
More investment opportunities for mutual funds will drive the growth further. The inflows in mutual funds have been positive in each of the last five years but given the extent of new inflows, going forward there will be a need for more investment opportunities through newer asset classes and products. In this regard, the regulator permitted investments in REITs, InVITs, silver ETFs, etc and is considering other categories.
Also, in the current age of hyper-digitalisation and artificial intelligence where there is high retail participation, responsible innovation on the product side is another driver.
Next, there is a need for enhancing investor education to deepen the penetration of mutual funds. Such education programs can also reduce the potential influence of finfluencers who may be acting as unregistered investment advisors or research analysts. In fact, they can help to set the right expectations through effective communication of associated risks and by making investors aware of what they are getting into.
Additionally, given the huge retail participation, trust and transparency become yet another important factor that will drive industry growth in years to come.
Potential in the MF industry
While the MF industry is expanding its reach, there is a good scope of penetration as 53% of the industry AUM still comes from the top five cities - Bengaluru, Delhi, Kolkata, Mumbai and Pune. Also, though the number of unique mutual fund investors is over 4 crore, it is a small fraction of the 50 crore-plus aadhaar-linked PANs. Moreover, comparing the MF industry size to the Rs 192 lakh crore of bank savings/deposits further points at its growth potential.
