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5 key trends to watch out in the Indian mutual fund industry

By Finserv MARKETS - Aug 26,2019
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The Indian mutual funds industry has grown by leaps and bounds in just over a decade. In fact, the growth of mutual funds in India driven by domestic investors has been the saving grace for the financial market in India in 2018-19. Without this growth, the markets would have seen a steeper decline than we see now.

On 31 December, 2018, total assets under management (AUM) with the Indian mutual funds industry stood at Rs. 4.13 lakh crore. By 5 years, with a compound annual growth rate (CAGR) of 15%, total AUM reached Rs. 8.2 lakh crore. However, by 31 December, 2018, AUM had reached Rs 22.86 lakh crore at a swift rate of 23% CAGR. AUM, in simple words, is the total mutual fund investment that took place in the country.

The Rapid Growth of the Mutual Funds Industry in India

5 key trends to watch out in the Indian mutual fund industry

As per current Association of Mutual Funds in India (AMFI) data for June 2019, total AUM for mutual funds in India stood at Rs. 25.81 lakh crore. That is a growth of 9.52% in assets over June 2018.

As the entire country and the world keenly watches how the Indian mutual funds industry will fare in the next 3-5 years, here are 5 key trends we need to watch out for in 2020 and beyond.

Increase in SIP investments

Financial experts are bearish on systematic investment plans (SIPs) in 2020 as well. According to AMFI, there has been an increase of 158% SIP mutual fund investment in India from April 2016 to March 2019. SIP investments driven by top mutual funds in India was Rs. 3,122 crore in April 2016, which increased to Rs. 8,055 crore by March 2019.

The AMFI and other finance experts believe that the pace of investment in SIPs will increase even more in India.

Improved adoption

The mutual funds industry is positive about the industry outlook in FY2020. Irrespective of the long-term capital gains tax (LTCG), more and more people in India are adopting mutual funds as a better avenue for investment compared to low-yielding traditional ones.

In fact, the growth in mutual fund investment in the country is spurred by retail investors in the Tier 2 and Tier 3 cities. 70% of the investors prefer to go the SIP route and most investors fall in the 18-32 years age group, says mutual fund experts.

As you can see, the outlook for mutual funds in India looks very promising. If you have been delaying your mutual fund investment plan, now is the right time to take the plunge. At Finserv MARKETS you can avail zero commission and brokerage-free mutual funds investment in top mutual funds. You can also start your SIP mutual funds investment at Finserv MARKETS with free and fast account opening, daily portfolio insights and exclusive offers.

Regulatory developments

The government has come up with some positive regulatory developments to encourage the growth of mutual funds in India. For instance, a slew of regulations to reduce the total expense ratio and distributors’ revenue were taken positively by the industry.

While regulatory pressure checks the costs of mutual funds sold by distributors, the increased adoption of digital platforms by investors will further bring costs down and result in rapid growth in this space.

Educated investors

Due to increased financial education mainly driven by online channels, more and more investors are becoming aware of the benefits of investing in mutual funds. Increased awareness and online education initiatives such as ‘Mutual Funds Sahi Hai’ campaign by the AMFI have really helped more investors to understand the product and dispel various myths associated with mutual funds. In fact the ‘Mutual Funds Sahi Hai’ campaign is credited for adding around 32 lakh new investors in 2017 alone.

Economic and political factors

Experts believe that apart from mass adoption by retail investors, mutual fund investments are also being driven by ground-level economics. A combination of low-interest rates and a lackluster real estate industry is helping the Indian mutual funds industry. With the general elections just completed and assembly election in some states coming up, the results of the assembly elections will have a direct impact on the mutual fund industry, believes experts.

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