Page 32 - Banking Finance September 2024

ARTICLE

particularly through Exchange-Traded Funds (ETFs) consistent inflows, even during market volatility.
and index funds, has been on the rise globally.
2. Regulatory Reforms Driving Transparency: The
Investors are increasingly favoring these low-cost, Securities and Exchange Board of India (SEBI) has
transparent investment options, especially as played a pivotal role in shaping the mutual fund
evidence suggests that many active managers
industry. Recent regulatory changes, such as the
struggle to consistently outperform their benchmarks.
introduction of new risk-o-meter guidelines,
In India, while actively managed funds still dominate
restrictions on total expense ratios (TER), and
the market, there is a growing acceptance of passive
enhanced disclosure norms, have improved
strategies, especially among institutional investors
transparency and investor protection. These reforms
and millennials.
have also increased the competitiveness of the
4. Globalization of Investment Strategies: With industry, encouraging innovation and efficiency.
increasing globalization, investors are looking beyond
3. Product Innovation and Diversification: Indian
their domestic markets. Mutual funds are offering
AMCs have been proactive in launching innovative
more globally diversified products, enabling investors products to cater to the evolving needs of investors.
to gain exposure to international markets. This trend The introduction of target maturity funds, multi-asset
is mirrored in India, where AMCs are introducing
funds, and sector-specific funds has provided
funds that allow Indian investors to participate in
investors with more tailored investment options.
global growth stories, particularly in sectors like
Moreover, the availability of international funds has
technology, healthcare, and renewable energy.
allowed Indian investors to diversify their portfolios
globally, mitigating domestic economic risks.
Current Growth and Developments in the
4. Increased Retail Participation from B30 Cities:
Indian Mutual Fund Industry
One of the significant developments in the Indian
1. Exponential Growth in AUM: The Indian mutual mutual fund industry is the increasing participation
fund industry has witnessed remarkable growth, with from beyond the top 30 (B30) cities. This trend is
AUM surpassing INR 40 trillion by 2023. This fueled by the penetration of digital platforms, investor
growth is attributed to the increasing participation of education initiatives, and the growing awareness of
retail investors, particularly through Systematic mutual funds as a viable investment option. The rise
Investment Plans (SIPs). The SIP model has become in retail participation from these regions is expected
a cornerstone of the industry, promoting disciplined to be a key driver of the industry's growth in the
investing among retail investors and contributing to
coming years.

Business Statistics and Market Challenges
1. Key Statistics:
AUM Growth: The AUM of Indian mutual
funds has grown at a CAGR of 14% over the past
decade, making it one of the fastest-growing
segments in the financial sector.
SIP Inflows: Monthly SIP inflows have
consistently exceeded INR 12,000 crore,
reflecting the growing adoption of systematic
investing among retail investors.
Retail Participation: Retail investors now
account for over 55% of the total AUM, with a
significant portion coming from B30 locations.

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