PMS, AIF, MUTUAL FUNDS- to be Rs.200 lakhs Cr Industry before 2030

The financial year 2024 has been a boon for equity investors in India, with remarkable gains propelling wealth creation to unprecedented levels. A staggering Rs 129 lakh crore was added to investors' portfolios, with certain stocks witnessing astonishing rallies of up to 2,700%. This surge in wealth accumulation mirrors the robust performance of the market, as evidenced by the substantial increase in market capitalization of BSE-listed firms, which soared to Rs 386.97 lakh crore by March 28, 2024, from Rs 258.19 lakh crore in the preceding year.

Mutual funds have played a pivotal role in this wealth creation journey, with actively managed funds constituting a significant portion of the total assets under management (AUM). Of the INR 55 lakh crore total AUM recorded in March 2024, approximately INR 45 lakh crore, or 82%, was actively managed. Within the realm of pure equity AUM, amounting to INR 28 lakh crore, passive equity funds accounted for INR 4.6 lakh crore.

The surge in AUM, marking a remarkable 37% year-on-year increase and a striking 123% surge from post-pandemic lows, reflects growing investor confidence. Notably, net SIP inflows hit a record high of INR 19,271 crore in March, with average monthly SIP inflows for FY24 amounting to INR 16,602 crore, representing a notable 28% rise from the previous fiscal year.

In tandem with this financial fervour, India's Portfolio Management Services (PMS) industry has witnessed remarkable growth, managing a colossal ₹32 lakh crore of assets. With India's promising economic outlook and increasing awareness among professionals and entrepreneurs regarding wealth management tools, PMS is emerging as a preferred avenue for investment. This trend is particularly pronounced in Tier II and III towns, where the financialization of savings and the inclination towards personalized financial solutions are accelerating.

The potential for transformation within the PMS industry is evident in its remarkable performance, with 79% of PMS schemes surpassing their benchmarks over a decade. Despite the minimum investment threshold doubling from ₹25 lakh to ₹50 lakh, the client base has expanded significantly, growing from approximately 106,000 to about 147,000 over the past five years. on capex are tailwinds for growth.

Data compiled from SEBI and the Association of Portfolio Managers in India (APMI) shows that SBI Funds Management, UTI Asset Management and Darashaw & Company are the top three PMS in India.

 With assets of Rs.13 lakh crore, SBI Funds Management is top of the ranking table. UTI Asset Management secured a second position with AUM of Rs.12 lakh crore. Darashaw & Company is a distant third with an AUM of Rs.1 lakh crore in Jan 2024. Of the total PMS AUM of Rs.32 lakh crore, these three players command 91% or Rs.26 lakh crore. Further, the AUM of the PMS industry excluding EPFO/PF investments stood at Rs.9 lakh crore on Jan 31, 2024.

 Furthermore, investor preferences are shifting towards unlisted equity, alternative investments, and international assets, aligning with global trends. This trend is mirrored in the substantial growth of assets under management (AUM) within the sector, which has more than doubled in the last five years, reaching ₹32.22 lakh crore by January 2024. The rise of Mumbai as the leading city in terms of billionaire residents further emphasizes India's increasing financial prominence.

Amidst this financial dynamism, private credit has emerged as a key investment avenue, with commitments raised by Category II funds reaching ₹8.8 lakh crore over the past seven years. With the alternatives industry expected to triple in size over the next five years, private credit is poised to play a significant role in shaping the investment landscape.

Conclusion

Maintaining composure and avoiding impulsive selling is crucial in navigating market volatility. It's essential to acknowledge that fluctuations are inherent in equity markets, with history demonstrating that downturns are often followed by periods of recovery and growth. Succumbing to panic selling during market declines and increased volatility can substantially diminish long-term returns for investors.

RBI dividend, followed by GST collections, higher income tax collections will lead to greater) public capex spending, (2) structural reforms and (3) incentives to boost manufacturing and infrastructure are likely to support India’s medium-term growth outlook and markets.

Historically, drawdowns in the Nifty index have seldom exceeded 10-15% except during global shocks and recessions. We anticipate that any further declines in the Nifty index will likely be limited, supported by resilient domestic macro fundamentals and our outlook for a gradual moderation in the U.S. economy. Resilient domestic demand, supportive government policies and continued focus on capex are tailwinds for growth.