Growth in Indian MFs among fastest in world

Led by a rising equity market and matching investor interest, growth of the Indian mutual funds industry, which recently crossed the Rs 350,000-crore mark, is among the fastest in the world.

Led by a rising equity market and matching investor interest, growth of the Indian mutual funds industry, which recently crossed the Rs 350,000-crore mark, is among the fastest in the world.

Data released in a recent report shows that during calendar year 2006, the industry’s growth at 43.6 per cent made it the world’s eight-fastest. Sandwiched between the UK (43.8 per cent) and Ireland (40.5 per cent), India is way below Russia’s 134.1 per cent but above Brazil’s 38.2 per cent.

Seen in a wider context, India’s growth rate is almost double the world average. Global assets under management (AUM) grew by 22.5 per cent to $21,765 billion. While the Americas rose by 17.6 per cent to $11,486 billion, Europe shot up 29 per cent to $7,744 billion. Closer home, Asia and the Pacific rose 26.7 per cent to $2,457 billion.

But while much of India’s growth has happened between 2003 and 2006 as the world recognised the India story and poured money into its stock markets, the fact is there are 17 countries that have seen faster growth rates during this period. The three-year compounded annual growth rates (CAGR) for Russia (88 per cent), Poland (50 per cent) and Argentina (48 per cent) are at a significant lead over India’s 25 per cent.

It is when you take a longer time series of five years that the numbers begin to brighten up. In absolute terms, at a five year CAGR of 30.7 per cent, India ranks ninth. But exclude smaller countries with tiny AUMs, like Romania, Philippines and Czech Republic, and India’s rank rises to six, between Ireland’s 32 per cent and Hong Kong’s 30 per cent.

With AUM of around $58 billion in December 2006, India’s absolute numbers, at less than 0.3 per cent of global AUM, are statistically insignificant. Out of 42 countries studied, India ranks 24 by AUMs during calendar year 2006, one rung higher than its 2005 ranking, two rungs higher than 2004 and 2003, and three rungs higher than 2002. In 1999, India’s rank was 32. At $10,414 billion and controlling 48 per cent of the world’s AUMs, the US is the clear and undisputed global leader.

These numbers form a part of 2007 Investment Company Fact Book, released by Investment Company Institute, yesterday. While the race for AUMs has heated up in India over the past three years, with major shuffling happening every month, and new funds hitting India every quarter (JP Morgan and AIG are the latest to join), these numbers show that the industry needs to change its perception of “scale” and extent of “growth” in order to hyper-jump into a globally significant league.