Mutual fund penetration in India among lowest, shows Jefferies report

 An analysis done by Jefferies shows India's MF AUM as a percentage of GDP at 12 per cent is among the lowest and a fraction of global average of 63 per cent

The domestic mutual fund's industry has come a long way with current assets under management (AUM) topping Rs 30 trillion. However, global brokerage firm Jefferies believes it still has tremendous growth potential as it has barely scratched the surface when it comes to AUM growth. An analysis done by Jefferies shows India’s MF AUM as a percentage of GDP at 12 percent is among the lowest and a fraction of the global average of 63 percent. Smaller emerging market peers, such as Brazil (ratio of 68 percent) and South Africa (48 percent), boast of better penetration. The brokerage estimates industry AUM to grow at a compound annual growth rate (CAGR) of 13 percent between FY22 and FY 24. Equity AUM is expected to post a 15 percent CAGR, with its share in the overall assets mix rising to 46 percent by FY24, from about 42 percent currently. India’s equity AUM to GDP is at 5 percent, compared to the global average of 34 percent.

Assets of equity-oriented schemes at the end of January stood at Rs 8.91 trillion. Developed economies like the US and Canada have 75 percent and 55 percent as their equity AUM to GDP.

Even the share of equities in the household balance sheet is a minuscule 4.3 percent, implying credible structural opportunities. Jefferies believes that equity outflows should abate with SIPs starting to pick up as the economy catches pace. “India has traditionally been a high savings economy (average 30 percent of GDP), but a large part had been allocated to physical savings. Hence, the long-term macro story stays favorable for India’s fund managers,” Jefferies analysts Abhishek Saraf and Prakhar Sharma write in a note.