The mutual fund (MF) industry of the country has seen remarkable growth, doubling its assets under management (AUM) in just four years, reaching an impressive milestone of Rs 50 lakh crore by December 2023. Projections from a recent report suggest that this figure could double again by 2030, potentially reaching Rs 100 lakh crore. This anticipated growth, with a projected compound annual growth rate (CAGR) of 14%, indicates the substantial potential for expansion within the industry.
The report highlights the pivotal role of digitization in attracting investors and driving this exponential growth. One significant contributing factor to this trend is the superior returns offered by equity AUM compared to traditional investment avenues, drawing increased interest from retail investors.
With rising savings and a nominal Gross Domestic Product (GDP) growth rate projected at 11% CAGR over the period from 2023 to 2030, household savings are expected to rise correspondingly, further fueling retail participation in MFs. The report underscores the significant room for growth within the MF landscape, with current penetration standing at just 15% of GDP, considerably lower than the global average of 74%.
Equity AUM has emerged as a dominant force within the industry, accounting for 56% of total AUM as of December 2023, compared to approximately 30% in FY16. Equity, including Exchange-Traded Funds (ETFs), now constitutes 70% of total AUM, with systematic investment plans (SIPs) becoming increasingly popular, boasting an average monthly investment of Rs 2,300. Despite these impressive figures, the MF industry remains relatively untapped, covering less than 5% of the working-age population. Furthermore, the average SIP investment size remains modest at Rs 2,300 per month, indicating substantial room for growth.
Looking ahead, mutual fund key players are expected to maintain their dominance, leveraging their strong distribution networks. Currently, the top eight asset management companies (AMCs) manage a significant 73% of the industry AUM. In terms of growth trajectory, overall AUM has seen a commendable 20% CAGR between FY14 and FY24, while equity AUM has experienced an even sharper rise, with a remarkable 32% CAGR over the past decade (FY14-FY24). Notably, equity AUM witnessed a particularly rapid ascent since FY19, soaring from Rs 10 lakh crore to Rs 29 lakh crore in just 45 months.
These statistics underscore the promising outlook for the Mutual Fund industry, driven by factors such as increased retail participation, growing savings, and the ongoing digitization of financial services. As the industry continues to evolve and expand, it is poised to play an increasingly vital role in shaping the investment landscape of the country.
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