Volatility in equity markets makes it challenging for mutual funds to create alpha or beat the benchmark index. According to Nilesh Shah, Chairman, CII National Committee on Financial Markets, Chairman, Association of Mutual Funds in India and Group President & Managing Director Kotak Mahindra Asset Management Co Ltd said that the mutual fund industry has done well in the past, but barely scratched the surface.
“Mutual funds have done well in the past, but we have barely scratched the surface if we look forward. One big challenge faced by the industry will be how the fund managers navigate the volatile market and generate alpha like before. The success of mutual funds will depend on how we transit to lower middle-income group & bottom of the pyramid and how we work towards expanding our network and move to rural India," Shah said in his statement at CII Mutual Fund Summit 2021.
He added that India’s asset under management (AUM) to gross domestic product (GDP) ratio at 12% is near China’s AUM to GDP ratio of 13%. However, when we look at western countries the ratio is significantly lower in terms of penetration of mutual funds. “Mutual fund portfolio numbers show that it is inclined towards HNIs, upper middle class and urban India but the challenge is to breakthrough into rural India," Shah said.
Speaking on the theme of ‘journey of inclusive and responsible growth’ focusing on enabling the industry to recover and bounce back from the current economic stress, M Damodaran, Former Chairman, Sebi, UTI & IDBI and Chairperson, Excellence Enablers Private Limited said that it is not real growth if it is not inclusive.
“If a small segment of society grows, it is not sustainable growth and it sets in motion tensions, frictions that could stress and possibly break the system. Thus, it is important to take everyone along the growth journey. He said that it is important for individuals and institutions to identify potential and to work towards that on a growth journey that is based on values, principals and is sustainable," Damodaran said.
Damodaran stressed that trust is critical, trust between the industry and regulator need to have a continuous and constructive conversation, on the basis of which regulations can be written that can stay the course.
Meanwhile, Sundeep Sikka, Chairman, CII Mutual Fund Summit and Executive Director & Chief Executive Officer Nippon Life India Asset Management Ltd highlighted that there is a huge untapped potential in Indian asset management Iindustry and the industry is headed towards a positive growth trajectory. “As the market bounced back, industry witnessed an optimistic sentiment through an evolved digital and technological ecosystem. The non-traditional investment products increased access to the growing investor base thereby building a future-fit industry to respond to the eminent market disruptions,"
According to Sikka, it is vital that the AMC industry invests in building the infrastructure of future while innovating and working on the new product landscape, redefining customer experience with a digital touch and optimising cost.
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