India’s $3.3 trillion opportunity for global fund houses
An undated editorial illustration of Indian rupee cash notes and stock market dashboard.
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This report is excerpted from CNBC’s ‘Inside India’ newsletter this week, which brings you up-to-date, informative news and market commentary on the emerging powerhouse. Subscriber Here.
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The growing investor pool in India is increasingly attracting global attention and the interest of fund houses is increasing again.
This year, the world’s largest fund house BlackRock has launched a slew of mutual fund schemes in India through Jio BlackRock, marking the US firm’s re-entry after its exit in 2018.
Reportedly the world’s fourth-largest asset manager, State Street looking To purchase shares from an Indian fund house.
Global companies from the US to South Korea are looking to list Indian business units, building on the boom in the country’s primary market and offering fund houses more avenues for investment.
Accelerating financialization of household savings in India is driving flows: as more individual investors join the capital markets, opportunities for asset managers to manage these funds also increase.
Global consultancy firm Bain & Company estimates that retail investor-focused assets of the Indian mutual fund industry will grow to 300 trillion rupees ($3.3 trillion) by 2035, from 45 trillion rupees in fiscal 2025.
Rakesh Pozhath, Partner, Bain, Bengaluru, said there is significant room for growth in the sector as India’s retail mutual fund assets are less than 15% of GDP, while mature economies like the US and Canada are less than 80%.
The report stated that salaried Generation Y and Generation Z in metropolitan cities are increasingly investing their savings in investment funds and even avoiding direct equities. For most investors, investing monthly has become part of the discipline. As a result, the share of long-term mutual fund assets increased, Bain said.
Investing through systematic investment plans that involve investing small amounts at regular intervals, tripled From 2021, it will rise to 2.89 trillion rupees in fiscal 2025, data from the Association of Mutual Funds in India shows.
India’s central bank said retail investors are increasingly opting for equity investments, primarily through mutual funds, over traditional savings vehicles. The Reserve Bank of India said in August that the share of mutual funds in gross financial savings of the household sector climbed It increased from 0.9% in fiscal 2012 to 6% in the year ending March 2023.
As the Indian economy grows, excess income in the middle class and upper middle class is invested in multiple financial products, said Vivek Sharma, head of international business at Nuvama Private.
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Experts say the Indian mutual fund industry has become big enough to attract the attention of global fund houses.
“Over the last decade, many global fund houses have either abandoned or meaningfully reduced their presence in India because there was no growth in the industry,” said Hiren Dasani, chief investment officer for Emerging Markets at WhiteOak Capital.
He said mutual fund assets have now grown large enough to attract the attention of even large global asset managers.
BlackRock has established Jio BlackRock Asset Management in a joint venture with billionaire Mukesh Ambani’s Jio Financial Services. accepted Regulatory authorities’ approval for the launch of investment funds in May this year. In July, it raised more than $2.1 billion from three funding programs.
In an interview with Bloomberg in September, CEO Sid Swaminathan jio Blackrock Asset Management says Indian mutual fund industry is waiting triple in the next seven years.
India’s growing pool of young, long-term investors is an opportunity not only for global fund houses but also for multinational companies.
The Indian primary market has been extremely hot this year despite the cooling of the secondary market.
The country saw companies increase The fund’s final reach is $11.4 billion through 252 IPOs in the first three quarters of the year, with several major listings (LG Electronics, Tata Capital and Lenskart) coming in the final quarter. raised It is expected to be higher than last year’s $19.9 billion.
While debate continues about some IPOs being overpriced, experts say strong domestic liquidity absorbs a large number of IPOs regardless of size.
Take the Indian IPO of LG Electronics, whose corporate book has been subscribed over 150 times.
According to data shared by Indian capital markets research company Prime Database with CNBC, approximately 22% of the 1.6 trillion rupees raised from major IPOs in India in 2025 were made by mutual funds.
As companies benefited from oversubscribed IPOs, mutual funds saw their investments soar. IPO returns for According to the EY report, the rate stood at 17.7% in the first three quarters of the year, while for the benchmark BSE Sensex, the rate was just 4.4%.
The opportunities arising from India’s shift towards financial assets do not end here. Experts say the last avenue open to this growing pool of investors is the flow of capital to the global market.
Investors in India are also willing to invest in US stocks to participate in themes such as the AI boom or to bet on China’s revival, but their participation is limited due to capital control norms.
Dhiraj Agarwal, managing director of Ambit Investment Managers, said mutual funds allow them to build assets abroad, although this is limited to $7 billion for the entire sector.
“Offshore investment vehicles in India are attracting huge interest,” he added.
Given the increasing demand and the size of the sector, most experts think that access to overseas investments is increasing for small investors, making the AUM opportunity more attractive for global funds.
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S. Krishnan, secretary of India’s Ministry of Electronics and IT, said in an exclusive interview that the country is focusing on artificial intelligence applications, expanding data centers and employment through indirect growth.
Evan Feigenbaum from the Carnegie Endowment for International Peace said that there is no major problem facing India and the solution is closer relations with Russia, but India-China has significant economic potential that has not yet been realized.
Stefano Baronci, ACI Asia-Pacific and Middle East, said flight cancellation issues at Indian carrier IndiGo were a “temporary setback”, adding that India’s air passenger market will lead the region’s growth.
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Big Tech doubles down on investing billions in India. Microsoft and Amazon pledged more than $50 billion to India’s cloud and AI infrastructure in 24 hours, while Intel announced plans to produce chips in the country on Monday.
Indigo shares fell as thousands of flights were cancelled. Airline passengers in India have faced major disruptions since last Friday, when the country’s largest airline canceled thousands of flights due to a change in rules regarding pilots’ rest periods. The airline said on Wednesday that operations had stabilized.
Indian central bank reduced the policy rate to 5.25%: India’s central bank on Friday cut its policy rate by 25 basis points due to “weakness in some key economic indicators”, in line with economists’ forecasts.
quote of the week
The big question for India is really revenue growth and where it will come from. We will need employment growth and wage growth next year, and one of the positive aspects of this is that the labor law, which was adopted in 2020 but is finally being implemented now, is finally being implemented.
In the markets
The Nifty 50 index was trading 0.5% higher as of 13:40 local time on Thursday and is up 9.4% since the beginning of the year. BSE Sensex gained 0.4% on Thursday and is up 8.4% so far this year.
The benchmark 10-year Indian government bond fell to 6.639% from a nine-month high of 6.663% on Wednesday.
— Lim Hui Jie
approaching
December 12: November consumer price index data; ICICI Prudential Asset Management Co IPO opens
16 December: HSBC December manufacturing flash PMI
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