The mutual fund industry hopes to garner Rs 1 trillion out of the Rs 10 trillion which is expected to be deposited in banks post demonetisation of old notes of Rs 500 and Rs 1,000 denominations.
The mutual fund industry, comprising over 40 fund houses, has already crossed the Rs 17-trillion mark in assets under management and is looking at doubling the AUM within the next three years. Of this, the demonetisation alone is likely to add Rs 1 trillion by December next year, as per industry experts.
"It is expected that deposits of over Rs 10 trillion will come to the banking system due to the demonetisation move and we do hope that 10 per cent of this amount will move to the industry," Union KBC Mutual Fund Managing Director G Pradeep Kumar told PTI.
"However, it will happen over the next one year or by December 2017 when people will divert part of their income in various MF products like liquid, equity or even balanced funds," said Kumar, who is also Vice-Chairman of AMFI, a nodal association of MFs across India.
Talking about the impact of demonetisation on Union KBC, he said, "We are likely to get a significant capital inflow." He, however, didn't give any figures.
Another fund house, Motilal Oswal AMC also sounded bullish about the impact of demonetisation.
"We believe people will no longer be investing in real estate and gold, and rather put in their money in capital markets, including mutual funds. However, it will happen over a period of time," Motilal Oswal AMC MD and CEO Aashish P Sommaiyaa said.
"The more the inflow of white money into the system, the more chances of capital flow into the mutual fund sector. At Motilal Oswal, we believe our AUM, currently at Rs 15,000 crore, will get doubled over the next three years," he said.
UTI Mutual Fund's Managing Director Leo Puri said the demonetisation is a very good step and it is directly related to the country's economy.
A significant part of the capital inflow to the system, which is likely to be more than Rs 10 trillion, may be redeployed in various financial products like equity, bond and other MF products, he said.
"We may also get a new class of investors in form of housewives. This is why we have undertaken an investor awareness programme," Puri said.
Talking about UTI MF, he said, "Our total AUM currently stands at Rs 3 trillion, of which Rs 1.3 trillion was domestic and the remaining in offshore fund. The domestic fund was likely to grow by 30 per cent by the fiscal-end and demonetisation will help a lot in achieving the projected target.
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