New Delhi, Oct 30 (UNI) India remains a marginal player in the global mutual fund industry as the assets under management(AUM) of Indian MFs, as a percentage of gross domestic proudct, was just eight per cent in 2006.
At eight per cent it more than doubled from three per cent in 1999 and is still growing, yet this is still small in comparison with the size of the sector in the developed world, according to Crisil FundServices (CFS).
The AUM of MFs were about 79 per cent each of the GDP in the United States and France, 33.54 per cent in United Kingdom and over 112 per cent in Australia. Even in emerging economy like Brazil it was over 39 per cent in 2006, the study says.
Indian MF industry, which started in 1963 with the setting up of Unit Trust of India (UTI), had AUM of Rs.4.86 trillion, as on July 31, 2007 - up by over 500 per cent from Rs 0.79 trillion as on August 1, 1999.
India's household savings have been consistently above 20 per cent in the first decade of the 21st century but the share of investments in MFs remains low at less than 5 per cent of total savings, the study says. In developed countries such as the US, half the households own mutual funds.
India's retail investors still prefer instruments such as National Savings Certificates, Public Provident Fund, bank and company fixed deposits, and insurance schemes, over MFs, the study adds. Still, the CFS believes that competition in the Indian MF industry will intensify and fund managers will have to deliver products that are relevant to investors.
It says though market regulator, SEBI, has already introduced sweeping changes in disclosure norms for the MF industry, investors will be increasingly drawn to the MF sector when the regulatory framework moves towards greater transparency, integrity, and viability. Increasing investor awareness will also help propel growth of the industry.
However, Crisl FundServices believes that the growth potential for the Indian MF industry is large. MFs will thrive if investors are better informed about the benefits of investing in MFs over other alternatives. This will help MFs become one of the primary investment options for retail investors. Much will depend on how well the fund industry creates and fulfils expectations.