India’s Mutual Fund Growth Potential
Underpenetration and Future Opportunities
A recent report by financial services firm Prabhudas Lilladher reveals that India’s mutual fund industry is significantly underpenetrated compared to global standards. The Assets under Management (AuM) to GDP ratio in India is only 16%, much lower than the world average of 63% and other countries like the US at 140% and Canada at 100%.
Despite over Rs 45,000 crore of monthly investments, only 34 million Indians invest in mutual funds, highlighting a vast potential for growth. The report points out that only 2% of household savings are allocated to mutual funds, indicating a reluctance among Indian households to explore this investment option.
With over 435 million PAN card holders in India, only 70-80 million file tax returns, and the mutual fund investor base is even smaller. This data suggests a significant opportunity for expansion as more individuals become aware of and comfortable with mutual funds as a viable investment tool.
The report concludes with optimism, projecting that the mutual fund industry’s unique client base could grow considerably as mutual funds gain wider acceptance as a preferred saving and investment tool.
Doubts Revealed
Mutual Fund -: A mutual fund is a type of investment where many people pool their money together to buy a variety of stocks, bonds, or other securities. It’s like a big pot where everyone puts in some money, and then a professional manager decides how to invest it.
Underpenetration -: Underpenetration means that not many people are using or investing in something compared to how many could be. In this case, it means not many Indians are investing in mutual funds compared to other countries.
AuM to GDP ratio -: AuM stands for Assets under Management, which is the total value of all the investments managed by a mutual fund. GDP is the Gross Domestic Product, which is the total value of everything a country produces. The AuM to GDP ratio shows how much of a country’s economic output is invested in mutual funds.
Prabhudas Lilladher -: Prabhudas Lilladher is a financial services company in India that provides research and advice on investments. They help people understand where to invest their money.
Household savings -: Household savings are the money that families save from their income after spending on things they need or want. It’s like the money you keep in your piggy bank for future use.
