Unlocking India's Mutual Fund Potential Amid Global Underrepresentation

A report reveals India's mutual fund potential, showcasing a 16% GDP ratio, starkly lower than the global average. Despite monthly investments of Rs 45,000 crore, only 34 million Indians engage in funds. Highlighting underpenetration, it suggests an optimistic future with substantial growth opportunities.

A recent report from Prabhudas Lilladher highlights a significant disparity between India's mutual fund industry's assets under management (AuM) to GDP ratio and the global average. Despite monthly investments of over Rs 45,000 crore, India's AuM to GDP ratio stands at a mere 16%, compared to the world average of 63% and much higher percentages in countries like the US, Canada, and the UK.

The analysis notes that even with rising investments from Indian retail investors, the mutual fund industry's penetration remains relatively low. From 4.3% in FY02, the industry's AuM as a share of GDP reached 16% by CY20, signaling considerable potential for growth.

Data shows that only 34 million of India's 1.4 billion population currently invest in mutual funds. The report stresses this low figure as indicative of vast growth opportunities, particularly given that mutual funds constitute just 2% of household savings, with most held in cash. Furthermore, with over 435 million PAN card holders in India, the mutual fund investor base is notably smaller, suggesting ample room for expansion as more individuals embrace mutual funds as a financial choice.

(With inputs from agencies.)