Mutual funds’ asset may cross Rs 50 lakh crore mark by 2025; these key factors to decide growth

India’s mutual fund industry is likely to grow in double digits, and the asset under management is expected to cross Rs 50 lakh crore mark over the five years through 2025. Equity funds are expected to vanguard this growth trajectory, with their share expected to rise from the present level of 42 per cent to 47 per cent, which is in line with global peers, said a report by Crisil. India’s favourable demographics, increased financialisation of savings, an inflation-targeting regime, and rising per-capita income are believed to be the major factors contributing to the growth of mutual funds.  

Research, data, analytics are need of the hour

The mutual fund industry would need independent research, data, and analytics to empower investor decisions and sustain growth. Given the complexity of products, increasing market volatility, a wider and savvier investor base, and changing intermediation models, the need for analytics and research have grown multifold, the report said. It is recommended that while selecting funds, it is important for investors to look at the attributes of the underlying portfolio, too, and not just focus on a performance yardstick like net asset value (NAV).

AUM of mutual fund industry crossed Rs 30 lakh crore in November 2020

The MF industry’s assets under management (AUM) expanded 6.3 per cent on-month in November 2020, settling at a record high of Rs 30.01 lakh crore. The fresh high followed October’s record of Rs 28 lakh crore. Inflows in open-ended debt funds coupled with mark-to-market (MTM) gains from equity market contributed to the rise in the industry’s asset base in November, even as investors continued to exit equity-oriented and hybrid schemes., Crisil added. 

Meanwhile, investors continued to exit open-ended equity-oriented schemes in November, with outflows rising from Rs 2,725 crore in October to nearly Rs 12,917 crore. Profit-booking is believed to be the major reason behind the outflow as stock markets shot up during the previous two months. In November, it was for the first time when there were outflows across all open-ended equity categories since April 2019, when the Association of Mutual Funds in India changed its format of dissemination.