India's MF assets-to-GDP ratio much lower than global average

The Domestic mutual funds industry has come a long way with current assets under management (AUM) topping Rs 30 trillion. However, global brokerage form Jefferies believes the industry still has tremendous growth potential as it has barely scratched the surface when it comes to AUM growth. An analysis done by Jefferies shows that India’s MF AUM as a percentage of GDP at 12 per cent is lowest among the world and a fraction of global average of 63 per cent.
 

Smaller emerging market peers such as Brazil (ratio of 68 per cent) and South Africa (48 per cent) boost of better penetration. The brokerage estimates industry AUM to grow at a compound annual growth rates (CAGR) of 13% between FY22 and 24. Equity AUM expected to post 15% CAGR, with its share in overall asset mix rising to 46 per cent by FY24 from about 42 per cent at present.
 

Currently, India’s equity AUM to GDP is at 5 per cent, compared to global average of 34 per cent.
 

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 per cent and 55 per cent as its equity AUM to GDP.
 

Even the share of equities in the household balance sheet is a miniscule 4.3 per cent - implying credible structural opportunities. Jefferies believes that equity outflows should abate with systematic investment plans (SIPs) starting to pick up as the economy catches pace.
 

“The broad macro story for rising share of financial savings remains strong. India has traditionally been a high savings economy (average 30 per cent of GDP), but a large part had been allocated to physical savings. Hence, the long-term macro story stays favourable for India’s fund managers,” Jefferies analysts Abhishek Saraf and Prakhar Sharma write in a note.