Mumbai and Delhi together account for about 45 per cent of the total equity mutual fund assets under management (AUM), a report prepared by the Boston Consulting Group (BCG) and Computer Age Management Systems on the domestic equity mutual funds industry said here today.
The average AUM of the domestic mutual fund industry is pegged at Rs 8,05,239 crore in June 2010.
The report says the concentration of equity AUM in the top cities is fast diminishing. The share of AUM beyond the top ten cities rose rapidly from about 10 per cent in March 2003 to about 26 per cent in March 2010. Mumbai and Delhi together account for about 45 per cent of the total equity AUM, and the top 30 cities account for about 90 per cent of the overall business, the report said.
"We believe the domestic equity MF industry is likely to continue growing rapidly for the next five-six years given many favourable factors like under-penetration, high economic growth rate, tax benefits for equity linked savings schemes, and enhanced presence in household savings products," it said.
"The MF asset under management is expected to grow by 20-30 per cent over the next five years, compared to 35 per cent growth registered in the past five years," BCG Partner & Director Alpesh Shah said, while releasing the report.
Retail investors in smaller cities are increasingly driving growth of the industry. Data suggest that retail products like SIPs and ELSS constitute a major part of this investment that has grown rapidly over the past five-years.
"Going forward, retail consumers will continue to play an essential role in the domestic equity MF space. Thus, it is essential to develop a plan to get retail long-term money in a cost-effective manner," Shah said.
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Nearly 80 per cent retail investors have made good returns from their investments in equity MFs during past two years ending March 2010. The analysis shows that over 72 per cent of redemptions were at profit and only 28 per cent at a loss, even during a generally turbulent period, it added.
"There has to be a focus on defining a geographic footprint strategy, keeping in mind the progression of the share beyond the top ten cities. Product innovation is also as critical given that bulk of retail investments has been in existing schemes as against NFOs," Computer Age Management Systems President and Chief Executive N K Prasad said.
Looking ahead, the report suggests that the industry has to keep in mind the regulatory changes and the implications of the same on the business.
The big regulatory change that has already happened is the removal of entry-load for all schemes and transparency in payments of commissions to distributors. This is a recent phenomenon, and the true impact of this change still has to play out.