Growth in Assets under Management of Selected Countries (CAGR ) 0% 5% 10% 15% 20% 25% 30%

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1 Mutual Funds

2 Mutual Funds In recent years, India has evolved as one of the fastest growing markets for mutual funds. During 24-1 the industry recorded a compounded annual growth (CAGR) of 23% as against the global average of 7%. The mutual fund industry in developed markets such as the US, France, and the UK on the other hand, grew at a comparatively lower rate. The rapid growth of the mutual fund industry in India can be largely attributed to rising personal income, growing risk appetite of the investors, and increasing reach of AMCs and distributors. Today, mutual funds have become a preferred form of investment for the common man as they offer an opportunity to invest in a diversified and professionally managed basket of securities at a relatively low cost. Growth in Assets under Management of Selected Countries (CAGR 24 1) France United States World UK Luxembourg Japan Russia Brazil % 5% 1% 15% 2% 25% 3% Note: - Based on AUM as of Dec 21 Source: - ICI Fact Book 211 India s share in net assets of mutual fund globally is negligible The mutual fund industry is primarily dominated by the US with total assets of around $ 11,82.7 bn followed by Luxembourg with $ 2,512 bn. The American continent accounts for around 55% of mutual fund assets globally. Europe is next with around 32% share. Although the share of Europe has marginally declined over the years, it still accounts for the largest chunk of the global mutual fund industry. Share of continents of global mutual fund industry 12% 1% 32% 55% Americas Asia and Pacific Europe Africa Note: - As on Dec 21 Source: ICI Fact Book 211 LVI

3 Nonetheless, despite emerging as one of the fastest growing markets for mutual funds, the share of the Indian mutual fund industry in the global mutual fund industry has remained low. It accounts for just.45%of the total net assets of the global mutual fund industry, which is much lesser than other emerging countries such as China (1.48%) and Brazil (3.97%). Top 5 Countries (Total Net Asset of Mutual Funds) No Countries Total Assets ($ in Mn) % of Total Asset 1 United States 11,82, Luxembourg 2,512, France 1,617, Australia 1,455, Ireland 1,13, Note: - As on Dec 21 Source: ICI Fact Book 211 India way behind China and Brazil The US continues with its dominance in average size per scheme at $ 1, mn; the global average size per scheme stood at $ mn. Furthermore, Luxembourg dominates in the number of schemes at 9,353 as at end-dec 21. Interestingly, Korea was second with around 8,687 mutual funds schemes; however, the size per scheme was quite small at around $ 3 mn. India ranks way below the global average in size and number of schemes. India had around 658 schemes as of Dec 21 with average size per scheme of $ 169 mn, according to the ICI Factbook 211. Comparison - Mutual Fund Schemes Vs Size per Schemes Average Size Per Schemes - US Mn $ 1,8 1,6 1,4 1,2 1, Sweden Switzerland India China UK Japan Brazil US France Korea, Rep. of Luxembourg 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Number of Schemes Size per scheme ($ Mn) No of schemes Note: - As on Dec 21 Source: ICI Fact Book 211 Domestic Mutual Fund Industry AUM is the market value of assets that an investment company manages on behalf of investors. The Assets Under Management (AUM) for the mutual fund industry in India grew at a CAGR of 16.3% over FY FY11 led by surge during FY6-FY11; AUM during this period grew at CAGR 2.6% compared with 5.8% during FY-FY5. LVII

4 Trend Analysis of AUM and No. of Schemes Rs Bn 7, 6, 5, 4, 3, 2, 1, FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY1 FY11 1,2 1, No. of Schemes AUM Schemes Industry AUM on a downward trajectory The AUM growth was at its rock bottom during FY1 owing to the burst of the dotcom bubble following which AUM of the industry grew, led by the rise in the equity markets, which was backed by overall growth in the Indian economy and increase in foreign investments. However during FY9, growth again saw a downtrend due to the global recession. The global financial crises stalled financial liquidity across the globe and led to risk aversion among the investing fraternity, which also led to redemption pressure, further bringing down AUM. Investment by Mutual Funds and Foreign Institutional Investors 2,5 2, 1,5 Rs Bn 1, 5-5 FY4 FY5 FY6 FY7 FY8 FY9 FY1 FY11-1, MF Investment FIIs Investment FIIs disappeared in FY9 but revisited India in FY1 Funds of the mutual fund industry surged following Total investments of mutual funds in 24-5 stood at around Rs 174 bn spurt to Rs 91 bn during FY8 at 72.9%CAGR. This was primarily backed by strong growth in the Indian equity markets during the same period. However, with the global financial crisis impacting overall liquidity conditions, coupled with risk aversion by investors, net investments of the mutual fund industry in 28-9 dropped to Rs 888 bn in However, with FIIs flow reviving in FY1 and with overall economic growth back on track, net investments by the mutual fund industry during stood at Rs 2,289 bn respectively. The same was primarily supported by investments in debt-based schemes. LVIII

5 Schemes Wise Share in AUM (FY11 1.6%.6% 2.9% 12.5% 49.3% 33.1% Debt Oriented Equity Oriented Liquid/Money Market Balanced Others Gilt Gilt Funds continue to form the least share in mutual fund AUMs Although the share of debt-oriented schemes declined marginally from 51% to 49.3% during FY11, these schemes continue to attract the highest investment by mutual funds. Equity-oriented schemes remain the second preference of investments forming 33% of total investments by mutual funds. Debt mutual funds witness growth over the years; equity investments stay volatile Rs Bn 3, 2,5 2, 1,5 1, 5-5 FY4 FY5 FY6 FY7 FY8 FY9 FY1 FY11 Equity Debt Category Wise Investment Details (FY11) 15% 1% 5% % 68% 22% 39% 49% 31% 61% Corporates Banks/FIs FIIs High Networth Individuals* Liquid/Money Market Gilt Debt Oriented 82% 11% Retail Equity Oriented Balanced Gold ETF ETFs (other than Gold) Fund of Funds investing Overseas LIX

6 Debt orient schemes least preferred choice of retail investors The above graphs 1.1 and 1.2 indicate that corporates and High Net worth Individuals (HNIs) parked a maximum amount of their money in debt-oriented schemes in FY11. On the other hand, retail clients invested most of their money in equity-oriented schemes. Liquid/money market schemes also drew handsome investments, which again were majorly driven by Bank/FIs clients. Sector-wise investments of mutual funds (FY11) 6% 6% 5% 21% 7% 7% 13% 7% 8% 12% Banks, financial services Oil, gas, petroleum 8% products Telecom & IT Capital goods, engineering Retail, FMCG & Consumer Durables Others* Auto, auto ancilliary & Transportation Pharma, healthcare Metals, mining Cement, construction Power Source: SEBI, D&B Research Banks and financial services stocks on a hat trick In terms of sector-wise diversification, during FY11, the banking and financial services sector saw the largest investments followed by oil, gas and petroleum products. Around 21% of the mutual fund equity investments were directed in the banking and financial services stocks. The banking and financial sector has been the favorite sector for the past two consecutive years by mutual funds. Telecom, capital goods, and retail and FMCG sectors were some other sectors that were favored by the mutual fund industry during FY11. LX