MF assets grow by 20 per cent

Nisha Das
31 March 2004

The asset size of Indian mutual funds have grown by about 20 per cent from Rs 47,000 crore in March 1993 to Rs 1,40,000 crore in December 2003 due to shift in investor preference for MFs and growing presence of private sector fund companies, according to CRISIL sectoral study.

"The shift in preference towards MFs has been facilitated by fiscal incentives, increasing returns from debt mutual fund investments due to the decline in interest rates and the growing number of choices available to investors," CRISIL's director-Financial Sector Ratings Raman Uberoi said.

Excluding Unit Trust of India (UTI), however, the growth has been a staggering eight-fold in just under five years, from Rs 15,200 crore as at March 1999 to Rs 1,20,300 crore at December 2003, CRISIL said.

The gradual change in the investors' risk profile and the Association of Mutual Funds of India's (AMFI) efforts for an appropriate regulatory environment have also contributed to growth of MF industry, the CRISIL study said.

There is a huge latent growth potential as industry size is only four per cent of the country's gross domestic product (GDP), very low compared to developed markets like United States where the assets under the management were more than 60 per cent of the GDP, or developing countries like Brazil, where the AUM is over 20 per cent of the GDP, it added.

Commenting on the volatility of returns and risks, CRISIL said the equity funds' reduced risk behaviour over the last two years while debt funds are exhibiting greater risks in their returns.