I don’t have to quote a lot of statistics to say the mutual funds industry is growing at a scorching pace, helped by internal and external factors. Clearly, what we are going to see now is that the help that the external factors are providing is perhaps going to decline.
I am specifically talking about the liquidity that the central bank provides. Across the world, the general feeling is that this is going to come down. US Federal Reserve’s Janet Yellen has made it clear and has set out a roadmap for how the central bank’s balance sheet is going to shrink in the next few years. So that takes away one part of the game. If we are to believe that one part of US liquidity would have to flow into India, concomitantly, a good part of that has to flow into mutual funds’ coffers.
The second important factor is demonetisation. The liquidity that got generated in the banking system’s balance sheet will also be on a reverse course.
