Indian Mutual Fund Industry: Navigating Through Tumultuous Waters

by Arin Ray, November 5, 2013
Industry Trends


Assets managed by mutual funds in India have grown at 5.5% annually since 2008, which is significantly lower than the 35% annual growth rate seen at the turn of the century. Moreover, many asset managers, predominantly foreign firms, have exited the Indian market.

In the report Indian Mutual Fund Industry: Navigating Through Tumultuous Waters, Celent explores the forces reshaping the industry. Lackluster equity market conditions and key regulatory changes have been agents of change. The Securities and Exchange Board of India (SEBI) discontinued the mandatory entrance fee for selling mutual fund products in 2009. This change is considered pivotal, and some argue that it has hurt growth prospects. However, we think it is reducing “churn,” or premature selling of fund investments by retail investors.

Source: AMR, Celent

The limited geographic reach continues to be a challenge for the industry. We believe the process of increasing industry reach will be a lengthy one, and firms need to think through their distribution strategy as well as business strategy. The industry has a very high number of schemes, which have been a cause for concern for regulators. More importantly, the majority of equity funds have failed to beat benchmark indices over time.

“Given the high concentration of asset managers in the market, we expect that some of the smaller players will not be able to survive in the longer term, and therefore the industry is likely to consolidate,” says Arin Ray, Analyst with Celent’s Securities & Investments Group and author of the report.  “Asset management firms are exploring a number of different models to stay competitive in this evolving environment. These include forming partnerships and alliances, taking the inorganic route, exploring the bank channel, offering portfolio management, and going international. “

This report discusses some of the regulatory changes that have been proposed or implemented. It analyzes the impact of these changes on different segments of the industry: investors, distributors, and asset management companies. It also discusses the product universe and the performance of mutual fund products in recent times. The report concludes with Celent's assessment of where the industry is headed.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary




Evolving Regulatory Environment


Investor Trends



Institutional Segment



Retail Segment



Limited Geographic Reach of the Industry


Distribution Trends



Assets Distributed Through Different Channels



Commission Revenue Earned by Distributors


Competitive Landscape



Asset Management Companies – Overview



Profitability of AMCs



Evolving Business Models


Products and Performance








Looking Forward


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


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