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Foreign mutual funds make a beeline to India

Around 18 foreign fund houses were planning to enter the Indian mutual fund industry, reports BS Srinivasalu Reddy.

business Updated: Jun 29, 2007 00:52 IST
BS Srinivasalu Reddy

The Indian mutual fund industry is heating up. At last count, 18 foreign fund houses were planning to enter the industry.

At least five of them, AXA, Nomura, Dawnay Day, Shinsei Bank, and Mirae, which received approvals in principle, are expected to kick off operations by the end of this financial year, according to the Association of Mutual Funds of India (AMFI).

"There are three reasons for this foreign interest. India's growth story holds promise for 15-20 years. Unlike our neighbours, we have not seen major political or social upheavals. Besides, Indian institutions are adjudged world class," said an AMFI executive.

"Any financial sector player aspiring for a global footprint cannot ignore India at this juncture. The industry is set to continue its rapid growth, given that only 4 per cent of total savings are invested in mutual funds now," he added. Savings of Indian households are growing at 34 per cent a year.

According to PricewaterhouseCoopers, only 2.66 per cent of Indians invest in mutual funds. The data provided by the global consulting firm also shows that Indian mutual fund assets are a paltry 7.24 percentage of GDP.

Arindam Ghosh, head (Asia Pacific), Mirae Asset Management, cited the excitement about the India growth story the world over as the reason for the rush into India. "Growth opportunities are high and long-term prospects are tremendous for tapping investors in Tier-II and Tier-III cities. There is no need to fight for a share of the pie," Ghosh added.

AIG and JP Morgan of the US, and Lotus Mutual Fund, a joint venture between Temasek of Singapore and Sabre Capital Worldwide, are the latest entrants in the industry with foreign participation.

"Given that just above 2 per cent of the people in the country are investing in mutual funds, there is a lot of potential for the industry to grow manifold. In several emerging economies over 8 per cent of the people invest in mutual funds," said Ajay Bagga, CEO of Lotus Mutual Fund.