Target bottom of the pyramid: Nilesh Shah tells MF industry

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In the fifteenth edition of the CII Mutual Fund summit, many prominent leaders of the industry were present to discuss the concerns of the mutual fund industry and to find out the solutions through their discussions. The summit was done digitally due to the ongoing crises of covid-19.

Nilesh Shah, MD of Kotak AMC who is also Chairman, CII National Committee on Financial Markets and Chairman, Association of Mutual Funds in India (AMFI) then Sundeep Sikka Chairman, CII Mutual Fund Summit, and Executive Director and Chief Executive Officer – Nippon Life India AMC shared the industry insights.

Highlighting on the data points, the mutual fund industry has seen a large rate of growth over the last two decades with a spectacular growth rate of CAGR 18%. The AUM in India has also grown four-fold in the last decade and aims at a fourfold growth along with three times growth in investor accounts to 130 million by the year 2025.

M Damodaran, chairperson of Excellence Enablers Private Limited and former Chairman, SEBI, UTI, and IDBI shared his thoughts in the inaugural session raising concerns. He said,” growth is not growth if it is not inclusive. If a small segment of society grows, it is not sustainable growth and it sets in motion tensions, frictions that could stress and possibly break the system. Thus, it is important to take everyone along the growth journey.’’  He further stressed that technology ought to be at the base of every effort that we put going forward, no matter whatsoever comes in.

Nilesh Shah, MD, Kotak AMC said,’’ India’s AUM to GDP ratio at 12% is near China’s AUM to GDP ratio of 13%. However, when we look at western countries the ratio is significantly lower in terms of penetration of mutual funds.’’

He stressed that mutual funds have done well in the past, but we have barely scratched the surface if we look forward. One big challenge faced by the industry will be how the fund managers navigate the volatile market and generate alpha-like before. The success of mutual funds will depend on how we transit to lower-middle-income groups & the bottom of the pyramid and how we work towards expanding our network and move to rural India.

Everyone agreed to the point that the Indian Mutual Fund Industry has worked really well so far and the growth has been tremendous but for a country like  India which needs little extra push has to be provided by the industry to bring on the trust among retail investor and make them invest in it.