New Delhi : Country’s mutual fund industry is expected to see its assets more than double to Rs12.8 trillion by 2012, with the entry of over 15 new fund houses in the near future, a latest report says.
US-based financial services research and consulting firm Cerulli Associates stated “India will continue to be one of the faster growing asset management markets in the world, with our projections showing assets will more than double to Rs12.8 trillion over the next five years to 2012”.
The report named ‘Asset Management Opportunities in India 2008´ stated that the growth in assets over the next half a decade would be driven by strong economic growth, deeper financial markets and a multi-varied distribution system.
At the end of 2007, there were 33 fund houses in the country including 16 joint ventures and 3 wholly-owned foreign asset managers with total assets worth Rs5.4 trillion.
The international asset management community is also well -represented in the country and is likely to grow as more global asset managers intend to set up business here.
Cerulli believes the total number of asset managers in India could rise to as many as 50 in the near future, with many of the new entrants coming from abroad.
The research firm’s projections suggest that Indian mutual fund market would see an 18% compounded annual growth rate (CAGR) over the next five years.
The growth of the domestic MFs might appear modest compared to the recent past, but it is likely to remain subdued in the short term as internationally the market is expected to see slower growth, it stated.
“Although country’s financial markets are still largely domestic in nature, and this is equally true for the asset management industry, India is far more correlated with the global economy than any time in the past and this will only increase in the future,” Cerulli MD Shiv Taneja said.
The mutual fund assets increased 67% last year compared to the year before. Coming off a four-year redhot growth phase, where assets saw a cumulative growth of just over 40% between 2003 and 2007, the country would still remain one of the faster growing asset management markets in the world, the report added.
Experts believe country’s mutual fund industry holds immense potential as it is significantly under penetrated and covers just 2% of households in the country. Also, several new fund houses are entering the space with plans to tap the tier II and III cities, even the rural areas.
Meanwhile, the correction in the equity markets in the past few months saw investors pulling out from fund houses but experts maintain that in the long term investments may definitely prove to be fruitful.