India's Mutual Funds Surpass US, Japan, and China with Impressive 19% Asset Growth

India's mutual funds industry is on a record-breaking surge in assets under management, fueled by the addition of over 20 million new investment accounts. This extraordinary growth, marked by an 19% increase in fund assets during the first 11 months of 2023, beating global peers like US, Japan and China.

More young Indians are getting involved in investing because of their interest in making money and easy access to smartphones. The boom in retail investing, driven by the pandemic, has resulted in local equity funds receiving money for 33 consecutive months until November.

Chang in Financial Asset Distribution

Even though more people are investing in mutual funds recently, it's still a small part (less than 9%) of what people own financially. This means there's room for mutual funds to grow. To compare, bank deposits make up about 45% of people's financial assets. Experts believe that in the future, mutual funds will become a more important part of what people use to manage their money, especially given the current trend.

Despite a withdrawal of $17 billion by global funds in 2022, worried about the Federal Reserve's tightening, the Indian market remained strong. This resilience is mainly attributed to a consistent flow of investments from within the country, acting as a shield against the impact of foreign outflows.

Growing Market Share and New Entrants

Money managed by Indian funds now represents about 16% of the South Asian economy, a proportion that has doubled over the last decade. With only approximately 40 million unique mutual fund investors in a country of over 1.4 billion people, there is considerable scope for further growth. Industry's average assets under management have surged by 8 trillion rupees ($96 billion) in the first 11 months of 2023, marking the largest increase in any year on record.

The under-penetrated market is attracting new entrants, including fund houses sponsored by Zerodha Broking Ltd. and Nextbillion Technology Pvt., the entities behind the two largest Indian brokerages. Bajaj Finserv Mutual Fund and Helios Mutual Fund, backed by Singapore-based money manager Samir Arora, have also made their debut, bringing the total number of fund houses in India to 44. Additionally, BlackRock, the world's largest money manager, is set to return to fund management in India through an equal joint venture with billionaire Mukesh Ambani’s financial services unit.

Final Words

India's mutual funds industry is doing well because more individual people are investing, and there's a steady flow of investments from within the country. This helps the industry grow and gain more market share. However, there are challenges, and how well the industry handles unexpected issues, whether from around the world or within India, will determine how strong it remains.