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Fighting all adversities and a tougher regulatory regime, mutual funds are headed for a cash-rich 2014 with an estimated addition of about Rs three lakh crore to its asset base to become a Rs 11-trillion market.
Helped by a smart rally in the equity market, the mutual funds' assets under management hit a record high of Rs 10.96 lakh crore in October itself and has remained near Rs 10.9 lakh crore as the year draws to a close.
Fund houses are upbeat about the industry performance for the next year as equity markets are expected to continue to deliver making the segment attractive.
"2014 witnessed significant milestones for the mutual fund industry, with assets growing 32 per cent to around Rs 11 lakh crore as on November," industry body AMFI's Chairman and top fund house Reliance Mutual Fund's chief Sundeep Sikka said.
The number of investors have also grown substantially this year, Sikka said, while adding that a rally in markets and improving economic indicators are expected to result in a much more broad-based participation in 2015. especially among retail investors.
"The next year (2015) will be a very good year for the mutual fund industry," JP Morgan AMC Managing Director and CEO Nandkumar Surti said.
HSBC Global Asset Management India CEO Puneet Chaddha said :"We are currently in a sweet spot wherein equity markets are expected to continue to deliver over the medium term making the segment attractive."
"We also need to consider that we are possibly at the peak of the interest rate cycle. Therefore, long term bond segment might become attractive as the interest rates go down," he added.
Besides, industry believes that any new entrant will not make its way in the MF sector any time soon next year.
In 2014, the total assets under management (AUM) of all 45 fund houses put together soared by 30 per cent on improved stock markets condition and strong inflows in equity and 'liquid' or 'money market', industry estimates show.
This was the third consecutive yearly rise in the industry AUM, after a drop in the assets base for two preceding years.
The year, however, also saw some exits, including by way of merger and acquisitions. Those having exited the Indian mutual fund space include Daiwa, ING, Morgan Stanley, Pramerica, Fidelity and Pinebridge.
The total industry AUM stood at Rs 8.26 lakh crore at the end of 2013, while the same was Rs 8.08 lakh crore at 2012-end. It stood at about Rs 6.11 lakh crore in 2011. It was about Rs 6.26 lakh crore in 2010 and Rs 6.65 lakh crore in 2009.
Mutual funds collect money from investors and later invest the same into various market segments including stocks, IPOs (primary market) and bonds.
This massive gain in mutual fund assets base is fuelled by gain in equities, supported by stable government and positive global scenario.
"Optimism of investors is one of the main reasons why the industry has seen the growth in this year. The new government coming into power with majority on their own gave sense of stability and hope that this will will bring economy back on track," Quantum AMC CEO Jimmy Patel said.
"Also inflows from foreign have been on the positive side which is playing a role in market levels reaching all-time high," he added.
"MF Industry continued its good run in 2014, with improvement across several fronts like asset growth, inflows, folios and SIPs.
"In 11 months of 2014, Industry registered equity inflows of Rs 1.2 lakh Cr which is 2.5 times that of 2013. With a stable government in place, and improvement in domestic economic indicators, we expect the Industry to achieve greater heights in 2015 with more broad based participation across both Equity and Fixed Income," Sikka said.
Another highlight of the year, was an impressive growth in number of equity folios. The equity category saw an addition of more than eight lakh folios to three crore.
After witnessing consistent decline in investor accounts in the past four years, the segment saw first rise in folios in the month of April.
Prior to that, the equity mutual fund sector had seen a continuous closure of folios since March 2009 after the market crashed due to the global financial crisis in late 2008. Since March 2009, it has seen a closure of 1.5 crore folios.
The investor base reached its peak of 4.11 crore in March 2009, while it was 3.77 crore in March 2008.
Additionally, a relatively higher number of NFOs were launched during the year. This was especially in the multi-assets, capital protection and close ended equity category.
The year 2014 has witnessed consolidation in the industry. Unfortunately it was not a voluntarily consolidation but a forced one. Post the Rs 50 crore net-worth rule for fund houses, market leaders were especially seen focusing on fund-level acquisitions.
However, the recent new move by Sebi that allows these small mutual fund companies to launch a maximum of two schemes annually till the time they meet norms will come to help.
"...while the ongoing spate of consolidation is likely to continue; we hope the new government to bring some positive change in the system," Patel said.
Chaddha believes that net worth criteria will not have any major impact as most fund houses would not have any issues in meeting these guidelines.


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