Mutual Fund aspirants queue up amid digital, regulatory tailwinds

Industry is drawing a fresh wave of entrants even as scale, profitability remain key challenges

Aspirants are making a beeline to set up mutual fund (MF) houses in the country, and nearly half a dozen firms are expected to start operations this year.

 

With new players joining the fray, competition in India’s ₹80-trillion MF industry — which already has more than 50 asset management companies (AMCs) currently — is set to intensify.

 

As of December 2025, applications from seven entities were under process for in-principle approval of MF registration, including Prabhudas Lilladher and InCred Techinvest.

 

In addition, four firms — such as Marcellus Mutual Fund and ASK Investment Managers — have already received in-principle approvals and are awaiting final registration.

 

More players are in the process of submitting applications. Industry executives say that, if cleared, this could mark one of the largest additions of new AMCs in a single year in recent times.

 

The rising interest from new entrants is driven by growing household allocations to financial assets, digital onboarding and investing, and regulatory changes that have eased entry barriers for smaller players.

 

Further, the introduction of a new category called specialised investment funds (SIFs) for sophisticated investors, offering high-risk strategies last year, also acted as a catalyst for seeking MF registration, said experts.

 

However, they caution that the operating environment remains challenging, given intense competition and the scale advantages enjoyed by large incumbents.

 

Dhirendra Kumar, chief executive of Value Research, said India’s MF industry remains at a relatively early stage, with low penetration and a widening investible base. This leaves room for differentiated players.

 

“There can be room for more players, but not for one more ‘me-too’ diversified equity house,” Kumar said.

 

He added: “The opportunity lies in niche, sharply differentiated models — low-cost index and exchange-traded fund (ETF) specialists, retirement and goal-based solutions. There are also true fixed-income specialists, quantitative or asset-allocation players, or category leaders in specific segments. Scale will be hard for many, but differentiation can make smaller players viable.”

 

Echoing this view, Robert Goldstein, senior managing director (MD) and chief operating officer (COO) at BlackRock likened India’s current MF ecosystem to that of the US and UK nearly three decades ago, underscoring the need for broader participation in the capital markets.

 

“India is going to become the third-largest economy in the world. The capital markets need to grow, and the mutual fund industry needs to be far larger than under a trillion dollars, which it is today,” Goldstein said at a session hosted by Jio BlackRock MF, a new entrant backed by two behemoths.

 

“When we look at the opportunity set, we think this is just the beginning,” he added, pointing to technology and distribution as key accelerators.

 

In just seven months of operations, Jio BlackRock MF has already onboarded one million customers, Goldstein said, highlighting the growing demand from investors seeking goal-aligned portfolios.

 

The industry has seen sustained net inflows and steady addition of new investors, with the total number of folios rising to 261.3 million as of December 2025.

 

Market participants attribute this momentum to deeper digital penetration, investor awareness campaigns, and regulatory initiatives by the Securities and Exchange Board of India (Sebi).

 

Among the key measures cited are Sebi’s 2023 decision to allow private equity (PE) players to act as sponsors for mutual funds and the introduction of a regulatory carve-out for entities offering only passive schemes under the MF Lite framework.

 

While Sebi has overhauled MF regulations to ease entry, it has also tightened norms around transparency of costs and expenses borne by investors, a move that several fund houses expect could compress revenues.

 

Industry executives also point out that smaller fund houses are leveraging their ability to offer higher commissions to distributors to gain early traction.

 

Kumar, however, cautioned that this strategy may deliver only short-term gains.

 

“Higher commissions can provide a distribution push in a crowded market, but they are not a durable advantage,” he said. He added: “If the fund house scales, that edge typically compresses; if it doesn’t, higher payouts don’t build a defensible franchise. Sustainable growth ultimately comes from performance, product clarity, service quality and trust — not from paying more to be sold.”