The limited participation from the rural sector too acts as a crucial restraint to the industry’s growth. Over 80% of the AUM and about 
10% of the industry’s retail profits are realised from just 10 big cities across the country. “There are less than 1,500 offices of all AMCs put together while SBI alone has over 10,000 branches. Moreover, with only around 60,000 ARN holders (persons authorised to sell MF Units) as compared to 20 lakh insurance agents, the situation is really poor,” agrees Sudip Bandopadhyay, CEO, Reliance Money. No doubt, the margins are less from rural business but it’s indeed one area from where the growth would be flowing in. As such the industry now needs to focus on increasing the touch points with the customers in rural areas along with Tier-II and Tier-III cities in order to tap in the real growth. Nevertheless, with mounting competition, tapping the untouched avenues is now a matter of compulsion rather than choice! The industry experts too believe that until fund houses realise this, it’s very hard for them to sustain in the long run. And why not? With more and more players biting into the same pie of urban investors, the industry definitely seems heading towards a deadly war zone.
Moreover, considering the changing macro scenario, when inflation and interest rates are on a constant rise, global capital flows are drying and corporate earnings are likely to show moderate growth, AMCs really seem to be on a rough road. And the rest is taken care of by the increasingly volatile stock markets! Bearing this in mind, in the last three months, AMCs have made a net investment to the tune of negative Rs.27.40 billion in equity. Playing safe, even their net investment in debt has gone down from Rs.118.82 billion in March 2008 to a miniscule Rs.59.18 billion in May. A good strategy indeed, considering the fact that a mutual fund typically reflects the state of the market it caters to (the benchmark Sensex has been down over 18% since January 1, 2008 )
10% of the industry’s retail profits are realised from just 10 big cities across the country. “There are less than 1,500 offices of all AMCs put together while SBI alone has over 10,000 branches. Moreover, with only around 60,000 ARN holders (persons authorised to sell MF Units) as compared to 20 lakh insurance agents, the situation is really poor,” agrees Sudip Bandopadhyay, CEO, Reliance Money. No doubt, the margins are less from rural business but it’s indeed one area from where the growth would be flowing in. As such the industry now needs to focus on increasing the touch points with the customers in rural areas along with Tier-II and Tier-III cities in order to tap in the real growth. Nevertheless, with mounting competition, tapping the untouched avenues is now a matter of compulsion rather than choice! The industry experts too believe that until fund houses realise this, it’s very hard for them to sustain in the long run. And why not? With more and more players biting into the same pie of urban investors, the industry definitely seems heading towards a deadly war zone.Moreover, considering the changing macro scenario, when inflation and interest rates are on a constant rise, global capital flows are drying and corporate earnings are likely to show moderate growth, AMCs really seem to be on a rough road. And the rest is taken care of by the increasingly volatile stock markets! Bearing this in mind, in the last three months, AMCs have made a net investment to the tune of negative Rs.27.40 billion in equity. Playing safe, even their net investment in debt has gone down from Rs.118.82 billion in March 2008 to a miniscule Rs.59.18 billion in May. A good strategy indeed, considering the fact that a mutual fund typically reflects the state of the market it caters to (the benchmark Sensex has been down over 18% since January 1, 2008 )
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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