Indians still prefer cash despite rising digital payments

Participants at the Assocham seminar in New Delhi. Pic Ira Puranik

“It’s not just about the investing, but doing it right, for the long-haul, systemically and in a goal-based fashion that makes one a crorepati in mutual funds”. This was the sentiment at a day-long first mutual fund summit organized by ASSOCHAM.

The discussion panel, which hosted representatives from prominent AMCs, NDSL, CDSL (both being major depository participants in India) and professors from NISM and Indian Institute of Finance, threw light on the roadmap for the industry ahead, the challenges faced and potential disruptions.

Strictly-Regulated
Most participants acknowledged that India was one of the most strictly regulated markets in the world.  “While I would not use the term over-regulated, it is true that we are one of the more stringently controlled capital markets in the world,” Vikram Dhawan, who manages Nippon Life India AMC, said. Despite that, there is no denying that India is witnessing an incredible period of growth, something no one would want to miss out on.

While that benefits the investors, the industry is yet to go a long way in terms of increasing its catchment and paying its due to other stakeholders, namely distributors and investment advisors.

Despite rapid technical advancements, the share of direct investing in mutual funds remains minuscule. Till date, 77% of individual mutual fund investments come via a distributor or agent. However, these individuals, which serve as cornerstone for widening the investor base and financial literacy, remain underpaid.

The same was the case with investment advisors, who have to currently renew their registrations every five years. Many panelists noted RIA applications pending back to 2021. Additionally, the certification and renewal cycle, which should ideally be automated, is very long in India.

Rohit Chawla, acting CEO of Taurus Asset Management Co,  criticised the Association of Mutual Funds of India, saying if he had the power, he would abolish AMFI because it is not doing anything to help the investors from tier-II and tier-III cities.

The discussion also touched upon smallcases, which were described as the “best thing to happen to the MF industry” by Zerodha founder Nithin Kamath, as pricey. Thanks to the regular churning and active management, smallcases work well only if the investment is high, somewhere between Rs 5-10 lakhs. Small investments are unable to subsume the high costs involved, thereby impacting returns.

However, as the event emphatically noted, the Rs 41 lakh-crore industry is neither without its positives, nor its challenges. Calling it an “exciting time to be in the nascent Indian mutual fund space”, Feroze Azeez, deputy CEO of Anant Rathi Wealth pointed out towards the change of mindset and philosophies to bring all both financial and physical assets on the same weighing scale.

Additionally, as Indians, we are used to “lazy investing” in FDs and small savings, noted Chirag Mehta, CIO, Quantum AMC. This needs to change if India is to inch closer to the global MF penetration levels of 75%, as opposed to its current levels of 15-16%