Time for a fierce fillip: India's asset management industry

(1)

Time for a fierce fillip: India’s asset management industry

Ashu Suyash

MD & CEO

CRISIL Ltd

(2)

0 1,500 3,000 4,500 6,000 7,500 9,000

8.5 8.7 8.8 9.0 9.1 9.3 9.4

Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Folio count (crore)

Investor folio count (crore)

SIP (Rs crore) Folio count (in crore)

17.1 17.9 18.1 18.6 18.8

3.2 3.5 3.7 3.9 4.1

Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

AUM in Rs lakh crore

PMS* AIF

Tough year for the economy and the financial markets…

… but participation in the capital market continues to increase

Economy de-grows, equity market faces turmoil amid pandemic Individual participation in MFs through SIPs holds steady

Direct equity participation surges Alternative investment assets continue to trend up

Source: MOSPI, NSE Source: AMFI

Source: CDSL, NSDL

4.1 3.1

-23.9

-7.5

8000 9000 10000 11000 12000

-30.00 -20.00 -10.00 0.00 10.00

Q3: FY 2019-20 Q4: FY 2019-20 Q1: FY 2020-21 Q2: FY 2020-21 Nifty 50

Quarterly GDP - Annualised (%)

GDP (Annualised) Nifty 50

247 270

308

348

393

485

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Nov-20

Total active demat accounts in lakhs

(3)

However, mutual fund penetration is a long way off global levels…

Low mutual fund penetration in India Low penetration of MF investors versus life insurance policies

Source: IIFA, IMF Source: IRDAI, AMFI

63%

120%

81% 80%

68% 67%

63%

48%

40%

32%

13% 12%

W orld US Can ada Fr anc e Bra z il UK G erma ny Sout h A fr ic a J apan Kor ea Chi na Indi a

AUM to GDP

5.1 5.7 6.6 8.3 9.5

39.8 39.3 38.9 38.7 38.4

2015 2016 2017 2018 2019

No of mutual fund folios as a % of working age population

No of life insurance policies as a % of working age population

(4)

Multi-cap funds Rs 19,382

16.0%

S&P BSE Sensex - TRI

Rs 15,127

14.5%

Gilt funds Rs 5,663

9.1%

Fixed deposits

Rs 4,014

7.2%

Long term horizon offers potential to capitalise financial savings

Liquid funds Rs 3,889

7.0%

Rs 1,000 invested

From November 2000 to November 2020 - Investment of Rs 1,000 has grown exponentially

Source: RBI, CRISIL Research, BSE

(5)

Mutual fund industry expected to channelise individual savings

• Growth drivers include anticipated pick-up in economy, growing investor base, higher disposable incomes, greater investable surplus and deeper geographical penetration

• Better awareness, ease of investing through digitalisation and a gradual pick-up in corporate earnings expected to support growth

Note: AUM is the average of the last quarter for each fiscal; P – projected Source: AMFI, CRISIL Research

AUM

8.0

27.0

52.0

Mar-2010 Mar-2020 Mar-2025P

Rs. trillion ~

(6)

Note: As per quarterly average AUM; equity funds include growth/ equity-oriented schemes (other than ELSS), ELSS funds, hybrid and solution-oriented schemes; debt funds include gilt funds/ gilt funds with 10-year constant duration, and the remaining income/ debt-oriented schemes; liquid/ money market schemes include liquid/ money market/ floater/ overnight funds. Others include index funds, gold

Needs of younger demography to drive greater share of equity funds

Source: AMFI, CRISIL Research

Equity funds AUM

42% 47%

28% 21%

23% 21%

7% 11%

Mar-20 Mar-25P

Equity Debt Liquid Others

Share of mutual fund AUMs

11.1

25.0

March-2020 March-2025P

Demographic dividend coupled with rise in

disposable income

Inflation targeting Increasing share of passive funds

Retirement funds – an untapped market

Growing digital footprint along with investor

education

Growth drivers

(7)

Selection of the right fund is the key to wealth creation

31 Equity funds (growth option), that have completed 20 years as on November 30, 2020 considered. Thematic and hybrid funds have been excluded. Funds have been classified based on quartile analysis

5,855

BSE Sensex TRI 15,127

55,802

4,000 14,000 24,000 34,000 44,000 54,000

9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 23.0

Performance of equity funds over the past two decades

20-year CAGR of equity funds in %

Valueof Rs1,000

Under performers

Average performers

Top

performers Above

average performers

(8)

(9)

Thank You

(10)

About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better.

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

CRISIL Privacy

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com/privacy.

Disclaimer

CRISIL has taken due care and caution in preparing this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this report. No part of this report may be reproduced in any form or any means without permission of the publisher. Contents may be used by news media with due credit to CRISIL.