Mutual Fund Industry May See New Entrants Soon. Know About Them Here…

Oct 17, 2020

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The Indian mutual fund industry currently has 40 players with asset under management of Rs 27.3 lakh crore as of September 30, 2020. Notably, the top 10 players account for around 80% of the total asset under management.

The AUM of the Indian MF industry has grown from Rs 6.57 trillion as on September 30, 2010 to Rs 26.86 trillion as on September 30, 2020, about 4 fold increase in a span of 10 years. With more and more people gaining awareness about the importance of mutual funds in one's investment portfolio, the mutual fund industry is expected to grow at a rapid pace in the coming years.

To be part of this growth journey various financial services firms have expressed interest in starting their mutual fund business.

One of India's major financial services company - Bajaj Finserv recently applied with SEBI for a license to enter mutual fund business. Bajaj Finserv, a part of Bajaj Holdings & Investments Limited, is focused on lending, asset management, wealth management and insurance.

According to a news report published in The Hindu BusinessLine, the entry of Bajaj Finserv with presence in 2,392 locations, including 1,357 in rural areas, small towns and villages will help in mutual fund penetration.

The report added that SEBI has been driving mutual funds to look beyond top-30 cities for attracting investors. The special incentives provided by SEBI for getting investments from beyond top-30 cities are slowing yielding results.

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Broking firm Zerodha too had applied for mutual fund license with SEBI in February and is awaiting approval. Till now SEBI has granted in-principle approval to NJ India Invest and Samco Securities for starting mutual fund business, though the final approval is still under consideration.

Meanwhile, Karvy Stock Broking's February 2019 application has been kept on hold in view of a pending regulatory action, while Frontline Capital Services' August 2017 application is still under review, according to a news report published in The Economic Times.

The Indian mutual fund industry is already overcrowded. SEBI may not easily grant new licenses unless it sees tremendous potential in a firm that can contribute to the growth of the industry.

If and when SEBI grants mutual fund license to one or more of these firms, investors should take note of the investment philosophy and investment process that the fund house will follow before making any buying decisions. Only process-driven fund houses can give you consistent performers over the long term.

[Read: Are You Selecting New Fund Offers Wisely?]

Additionally, it is important to check the investment mandate of the product being launched. The product should be suitable for your risk appetite and investment horizon and must enable you to realise your set financial goals.

If you invest in a New Fund Offer (NFO) make sure to review the performance of the scheme periodically. Some newly launched schemes perform well over the short term, but it is important to assess a scheme's performance over the long term to determine its worthiness.

If you wish to select worthy mutual fund schemes, I recommend that you subscribe to PersonalFN's unbiased premium research service, FundSelect.

Additionally, as a bonus, you get access to PersonalFN's popular debt mutual fund service,  DebtSelect.

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If you are serious about investing in a rewarding mutual fund scheme, Subscribe now!

Warm Regards,
Divya Grover
Research Analyst

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