New Delhi: Domestic Mutual Funds (MF) Industry will grow at CAGR of 30% in next three years to touch its level at Rs 9.50 lakh crore from Rs 4.67 lakh crore in July 2007 with contributions of private, public and joint sector mutual funds players, staying around respectively 70%, 20% and 10%, according to a paper on MF Growth Patterns’, brought out by Assocham.
It highlighted that in view of growing awakening and certainties prevailing in MF industry, its market penetration would more than double by 2010 from about 4% now as gradually mutual funds become preferred savings instruments for urban and rural investors.
* Comparing India’s MF industry with that of US, despite Indian MF growing at much higher rate, it is still 100 times behind US MF industry
* Domestic MF industry size in is currently estimated at over$12 trillion as against Rs 4.67 lakh crore of India with market penetration of 4% of India’s total population, compared to 49% in the US and 20% in UK
* In India, MF industry manages nearly 700 schemes while US MF industry has more than 12,000 MF schemes
* Domestic MF industry currently forms 10% of its GDP and was tightly regulated and opened for private sector after 1993
* Despite, its performance and track record exceeding between 1999 - 2007 and the industry growing at over 25% CAGR, trend will improve further as investors, particularly retail ones choose a good chunk of their savings volumes towards MF
* MF industry will grow and touch the projected level of Rs 9.50 lakh crore by 2010
* Currently, share of privately managed MF players in the total MF industry size of Rs 4.67 crore is estimated at 82% which will fall to nearly 70% since private sector MF players will forge alliances with overseas partners in the joint sector
*Public sector share in current MF industry size will go up from nearly 20% from less than 10% now and that of joint sector to about 10% from 8% now
* MFs are relatively safe investment options for retail participants and they adopt professional and prudent fund management techniques and measures to ensure that the probability of investors getting returns that are greater than the underlying benchmarks is high. It also minimizes risks for investors.
* Emerging trends would be that commodity funds will invest in commodities such as metals, food grains, and crude oil, commodity companies, or commodity futures contracts
* Real estate funds will invest in real estate directly; fund managers will need to deliver products that are relevant to investors. As Indian markets and investors mature, financial advice, product diversification, and multi-distribution channels will become critical for long-term success.
* Step up investor awareness, which will help propel growth for the Indian MF industry
* Investors need to be warned against the common fallacy of comparing returns of debt-oriented fixed-income MFs and fixed-income products of small savings schemes without considering the attendant risks