What's Happening?
India's mutual fund industry is experiencing rapid growth, driven by an increasing number of retail investors. According to Bain & Company, the assets managed by retail investors in India's mutual fund industry are projected to reach $3.3 trillion by 2035.
This growth is attracting global attention, with major fund houses like BlackRock re-entering the Indian market. The Reserve Bank of India has noted a significant shift in household savings towards mutual funds, with the share rising from 0.9% in 2012 to 6% in 2023. The trend is fueled by salaried millennials and Gen Zs in metro cities who prefer mutual funds over direct equities, contributing to the rise in long-term mutual fund holdings.
Why It's Important?
The expansion of India's mutual fund industry presents significant opportunities for global asset managers and multinational companies. As more retail investors participate in capital markets, the potential for asset managers to handle these funds increases. This shift is not only beneficial for fund houses but also for companies looking to list their Indian business units, leveraging the boom in the country's primary market. The growing pool of investors could also unlock capital flows into global markets, allowing Indian investors to gain overseas exposure. This development could enhance the attractiveness of the Indian market for international investments, fostering economic growth and financialization.
What's Next?
As the Indian mutual fund industry continues to grow, global fund houses are likely to increase their presence in the market. The demand for overseas investments is expected to rise, potentially leading to improved access for small investors. The industry may see further regulatory changes to accommodate the growing interest in international equities. Additionally, the success of IPOs in India could encourage more companies to go public, further boosting the market's liquidity and attractiveness to investors.
