Against the grain: Which emerging market’s fund industry grew 50% in a year?

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Historically, some 30% of Indian GDP has been in savings – typically gold and property – but demonetisation in November 2016 and the Aadhaar scheme are, together, encouraging these savings into the financial system. Moreover, this environment of plentiful liquidity is driving down funding costs for lenders and spurring the fees of businesses related to asset management.

Around 60,000 mutual fund accounts are being opened every day in India, and Indian mutual funds have almost doubled their assets under management (AUM) in just over three years.

The Indian mutual funds market has gone through three distinct phases over the past 13 years, with compound annual growth rates (CAGR) improving markedly over the past three years, on the back of higher market returns and stronger flows following demonetisation last November.

Given that the penetration of mutual funds in India as a proportion of GDP is less than a quarter of the global average, and below that of many other emerging markets, we believe there is a long ‘runway’ for growth in this area.

Sophia Whitbread – portfolio manager on the Newton Emerging and Asian Equities team. Newton, a BNY Mellon company.

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