Mutual Fund Industry Booming in India

Assets are pouring into mutual funds in India, doubling in the past three years to $48 billion, Dow Jones reports. And half of those assets are managed by foreign companies, including Franklin Templeton, Prudential and ING Group.

This prompted Fidelity Investments to enter the market last year and JPMorgan with plans to set up shop in India later this year. American International Group also is gearing up to enter India in the near future by setting up a company it will wholly own, not a joint venture.

The floodgates to India opened after 1999, at which time the Unit Trust of India controlled 80% of all mutual fund assets and had a virtual monopoly on the industry. Today, Unit Trust of India has a 13% market share. But deregulation of India's asset management industry really dates back to 1992, when India formed the equivalent of the Securities and Exchange Commission, the Securities and Exchange Board of India, to regulate mutual funds. That led to new rules that allowed foreigners, including mutual funds, to invest in local businesses.

Another factor fueling growth of India's mutual fund business is its booming economy. After a decade of annual economic growth of between 5% and 6%, in the past two years, the nation's economy has grown on average 8% a year.  The Bombay Stock Exchange Sensitive Index has risen more than 300% in the past three years. With interest rates in India sharply down in the past few years, savings accounts, on the other hand, are offering investors single-digit returns. Combined, these factors have boosted the savings power of middle-class Indians and heightened their interest in mutual funds.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries