Indias booming fund management industry has started to decline as the Indian stock market has plunged nearly a third so far this year, Reuters reports.
The drops have occurred in profitability as investment flows decreased, competition increased, and operation costs remain at record highs.
In particular, smaller firms and global fund houses that entered the market because of its previous high growth are set to be hit the hardest.
Global fund houses such as Prudential Plcs ICICI Prudential Asset Management venture with ICICI Bank, Reliance Capital Ltds fund division, and Franklin Resources Inc., have all been linked to the Indian market for years. Recent arriving firms in the market are Pioneer Global, UniCredit, American International Group Inc., and JPMorgan.
All of these firms were attracted to the Indian market because of its five year bull run where stocks increased 500%, bringing in $12.98 billion by the end of 2007. Assets have only fallen 5% since then, but executives say the situation is worse then it appears, since assets invested in stocks have dramatically fallen.
Equity funds, the industrys most profitable products, have deceased by one-third. In addition, inflows of equity funds have fallen to a low in June and new stock funds have only taken in 18.3 billion rupees, compared to 63.35 billion last year.