FUTURE OF MUTUAL FUNDS IN INDIA

Future of Mutual Funds in India






By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore.

The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

Let us discuss with the following table:
Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)
Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec
Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579
Change in % over last yr 15 14 13 12 - 18 3
Source - RBI
Mutual Fund AUM's Growth
Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec
MF AUM’s 68984 93717 83131 94017 75306 137626 151141 149300
Change in % over last yr 26 13 12 25 45 9 1
Source - AMFI

Some facts for the growth of mutual funds in India
• 100% growth in the last 6 years.
• Number of foreign AMC’s are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.
• Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion.
• ‘B’ and ‘C’ class cities are growing rapidly. Today most of the mutual funds are concentrating on the ‘A’ class cities. Soon they will find scope in the growing cities.
• Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products.
• SEBI allowing the MF’s to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based advice.