India's mutual funds base to top $325 bn by 2018: Sundeep Sikka

Says domestic funds industry were able to counterbalance the exodus of foreign institutional investors

Riding on the overall positive mood on the Indian economy, the asset base of the mutual fund industry in the country is set to grow faster at 18.6% per annum to top Rs.20 lakh crore ($325 billion) by 2018, says a top industry expert.

"The overall positive environment that we have seen over the past year is giving a big boost to the confidence level of retail investors in India," said Sundeep Sikka, chairman of the Association of Mutual Funds in India (AMFI) that has as members all the 44 such firms registered with the watchdog.

"I think the positive returns in the mutual fund industry, along with the push being provided by the government create both physical and financial assets and will also play a big role in promoting mutual funds," said Sikka, also president and chief executive of Reliance Capital Asset Management (RCAM).

Accordingly, he said, the time for mutual fund asset base to reach the Rs.20 lakh crore figure was being advanced by two years, even as the total number of individual mutual fund folios, which is 4 crore at present, is set to touch 10 crore in the next five years.

Referring to the past fortnight, Sikka said the domestic funds industry were able to counterbalance the exodus of foreign institutional investors. While these overseas funds pulled pout some Rs.8,000 crore from Indian stocks, domestic fund houses were net buyers of Rs.9,500 crore.

"In fact, in the past one year, our mutual funds have been able to provide a counterbalance of over Rs.70,000 crore, thanks to the net investment into equity schemes," he said, adding the decision to allow 15% of provident fund money into equity and similar assets will give a further push.

Giving some more data on the past-year performance of the mutual fund industry in India, Sikka said assets under management rose 31% to Rs.11.8 lakh crore, some 22 lakh new folios were added during the year, and retail funds mobilised at Rs.1.63 lakh crore has seen a three-fold jump.

"The kind of wealth investors have created in the last few years will lead to a situation where more and more new investors will keep coming to the industry. Existing investors will also keep increasing their allocations," said Sikka.

He said companies like Reliance Capital -- a part of the Anil Ambani-led group that has assets worth over Rs.250,000 crore ($40 billion) in its fold -- are also educating people and creating awareness, notably in smaller towns. "This will fetch a lot of first time investors into the industry," he said.

"At present, only 2% of the overall investment money comes to mutual funds."

Sikka was also positive about several developments, all with the potential to fetch more money into the mutual fund market. Flows from: Idle money in banks, from investments otherwise made in company deposits, and amount that goes into gold that has been losing sheen over the past few years.

"Ideally we would like to see every Indian household as a mutual fund investor. In India, where there is little social security, and long term wealth can be created in the capital markets through equity, it is in the interests of investors and the country that money starts moving for capital formation."

(Aparajita Gupta was in Abu Dhabi at the invitation of Reliance Capital Asset Management. She can be reached at aparajita.g@ians.in)