Mutual funds are now 21% of the bank deposits. On the other hand, the Indian mutual fund’s industry still has much to gain on with its worldwide squint regarding of the brisk and massive growth in the recent times.
In spite of a massive rise in the equity market and a stable inflow through the SIPs (Systematic Investment Plans), mutual funds had become successful in enticing the trade investors as their equity AUM (Assets under Management) rated for 8% of the bank deposits in the previous fiscal year. According to the data obtained by the RBI, the equity assets of the mutual funds were ₹9.3 lakh crores in averse to ₹115 lakh crores in bank deposits by March end.
Progressively, the latest data reveals that the mutual funds are getting well-liked among the investors. The AUM of the mutual funds was counted at 10.44% of the total bank deposits by March 2013. This percentage has increased to 17.44% in March 2017 and then gains a hike to 21% in December 2017. In past 4 and half years, the mutual fund industry has added an amount of ₹ 14.25 lakh crores meanwhile ₹33.79 lakh crores increased the bank deposits.
Also, mutual funds AUM stances at 18% in March 2017, on the other side this ratio was 100% in the US. A huge growth possibility can be seen in India in terms of population dispersion and increasing per capita income from ₹75,000 to ₹2.5 lakhs. The mutual fund industry has attempted several campaigns like ‘Jan Nivesh’ and ‘Mutual Fund Sahi Hai’ to attract the investors towards MF. Also, in the past six years, the mutual fund industry has acquired the growth of 20%. Mutual fund AUM will touch ₹95 lakh crores by 2025 if the industry gets to attain this rate.
One of the biggest macroeconomic improvements in MFs is AUM to GDP ratio. Vast change can be seen between the percentage of GDP in FY 2000 and the GDP of FY 2018. Where the GDP was 5.6% in FY 2000, now it has risen to 12.8% and this growth indicates the huge growth potential of the MF industry.
The chart shows that developed countries like the US (101%), France (76%), Canada (65%) and the UK (57%) have listed high-level mutual fund penetration. Similarly, the emerging countries like South Africa (49%) and Brazil (59%) have an outrageous allocation in mutual funds in comparison to India. The distribution of India indicates a significant scope for growth as the average of the mutual fund penetration of the world stances at 62%.
This chart shows that the highest allocation percentage of equity mutual fund AUM to market cap ratio is of Germany that is 51%, the US stands second with 41%. While India has only 4% allocation and such low penetration suggests that there is a steady growth prospect for the MF industry, especially in equity mutual funds.