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As the global economy navigates through various economic challenges, a prevailing sense of optimism continued to drive progress forward. As per the World Economic Outlook released by International Monetary Fund (IMF) in April 2023, baseline forecasts predict a decline in growth from 3.4% in 2022 to 2.8% in 2023, followed by a recovery to 3.0% in 2024.

Escalating fuel and input costs have led to a surge in production costs, resulting in higher prices for goods and services worldwide. The IMF’s World Economic Outlook also reported that global inflation peaked at 8.7% in 2022 due to the prevailing inflationary environment. This elevated level of inflation raised concerns among central banks worldwide, leading to a tightening of monetary policies, higher interest rates, and greater volatility in financial markets. However, cooling fuel and commodity prices are anticipated to contribute to a decline in global inflation to 7.0% in 2023 and 4.9% in 2024, thereby easing some of the challenges. Moving forward, coordinated efforts from global economies towards addressing key supply chain challenges as well as tackling geopolitical tensions will be influential in charting the trajectory for the future.

The economic prospects of advanced economies are anticipated to experience a significant slowdown in growth, dropping from 2.7% in 2022 to 1.3% in 2023, owing to geo-economic fragmentation. In contrast, emerging markets and developing economies are expected to have stronger economic prospects, with an average growth rate of 3.9% predicted in 2023, and an anticipated rise to 4.2% in 2024.


(Source: IMF)

Indian Economy

The Indian economy has exhibited remarkable progress, demonstrating an exceptional growth trajectory that has outpaced that of several other nations in the process. Nevertheless, the country faced the challenge of soaring inflation levels, exacerbated by the ongoing Russia-Ukraine conflict. Despite collective efforts by the government and the RBI, retail inflation only fell below the RBI’s upper tolerance threshold in November 2022. Meanwhile, the Wholesale Price Index (WPI) has dropped by 1,592 basis points from its peak of 16.63% in May 2022, currently standing at 1.34% in 10 months. Conversely, the Consumer Price Index (CPI), which measures retail inflation, reached a 16-month low of 5.66% in March 2023. Starting with the first repo rate hike in May 2022, policymakers have raised the repo rate six times during FY 2022-23, resulting in a cumulative increase of 250 basis points to the current level of 6.50%, with the most recent increase occurring in February 2023.


(Source: Morgan Stanley Report on Investment in India)

Despite facing these challenges, India is poised to remain the fastest-growing major economy, with numerous international agencies projecting a growth rate of 6.5-7.0% in FY 2022-23. This optimistic outlook is partly attributable to the Indian economy’s resilience, which has witnessed a resurgence in private consumption, now the primary growth driver, surpassing export incentives. The increase in private consumption has also spurred production and enhanced capacity utilisation across multiple sectors.

The convergence of three major trends - global offshoring, digitalisation, and energy transition - is set to pave the way for unprecedented growth in the country. As geopolitical uncertainties recede, consumer sentiment is expected to improve, providing a significant impetus to all sectors. India’s significant investments in technology, infrastructure, and energy will position it towards the trajectory of becoming one of the world’s leading economies in the coming decade.


Global mutual fund industry witnessed growth of 3.1% CAGR between 2019 and 2022

Globally, the mutual fund industry AUM grew from US$ 54.9 tn in 2019 to US$ 70.9 tn in 2021 but declined to US$ 60.1 tn in 2022 as global economy witnessed tightening of monetary conditions in most regions with central banks of several countries increasing interest rates to fight inflation. According to IMF, a broad based and sharper than expected slowdown with high inflation was being faced across the globe in 2022. Moreover, Russia-Ukraine war had caused severe energy and commodity price shocks, and disruptions in international trade.

The World GDP recovered strongly post-pandemic and grew at 13.6% to reach US$ 96.3 tn in 2021. The recovery was supported by various economic measures of governments like stimulus packages to fight the pandemic, ease of COVID-led restrictions and vaccination drives across countries. In 2022, global economy showed some resilience to economic slowdown and grew at 4.1% year-on-year to cross US$ 100 tn in 2022.

Mutual fund AUM-to-GDP ratio stood at 60% in 2022. In 2023, the mutual fund AUM-to-GDP ratio is expected to rise on the back of increased participation of retail investors, cooling of inflation and government policies across the globe.


Despite robust growth, India’s AUM-to-GDP ratio remains low as compared to other economies

India has witnessed impressive growth in its mutual fund industry in the last two fiscals. India’s AUM-to-GDP ratio reached all-time high of 15.9% in fiscal 2022 which was driven by increasing financial awareness, rising participation of retail investors, increase in investments through systematic investment plans, and ease of access and investing provided by various platforms.

Note: P: Predicted, year in the above charts represent calendar year, nominal GDP has been considered, mutual funds AUM is stated as at the end of each calendar year, AUM of open-ended funds excluding fund of funds has been considered. Source: The International Investment Funds Association (IIFA), World Bank, International Monitory Fund (IMF), CRISIL MI&A

Indian Mutual Fund Industry

India’s mutual fund penetration (AUM-to-GDP) is significantly lower when compared to many developed economies such as the U.S. at 112.3%, the Netherlands at 68.8% and the United Kingdom (UK) at 58.6%. Mutual fund penetration in India’s emerging counterparts such as Brazil and South Africa is much higher at 72.5% and 45.5% respectively as of 2022. Although the Asian market is still underdeveloped as a whole, but some countries like Singapore, Malaysia and Hong Kong are performing well with AUM-to-GDP ratio of 179.9%, 50.5% and 48.4%, respectively. This reflects that Indian mutual fund industry is still in its infancy and there is a lot of scope for development.

Note: Above charts represent AUM-to-GDP ratio; Nominal GDP and AUM data of USA, Netherlands, Brazil, UK, Japan, South Africa, New Zealand, China, Malaysia, Indonesia and Philippines has been taken as of 31st December, 2022. Nominal GDP and AUM data of Singapore has been taken as of 31st December, 2020. Nominal GDP and AUM data of Hong Kong has been taken as of 31st December, 2021. Nominal GDP and AUM of India has been taken for financial year 2023 (April 2022-March 2023). Open-ended funds excluding fund of funds have been considered in the first chart, GDP of all the countries is based on current prices estimation by IMF in World Economic Outlook of April 2023.

Source: IMF, IIFA, Monetary Authority of Singapore ("MAS"), Hong Kong Investment Fund Association, Securities Commission Malaysia, Association of Investment Management Companies (Thailand), Financial Services Authority of Indonesia, CRISIL MI&A

Trends in the Indian Mutual Fund Industry

Robust growth in Indian mutual fund AUM between fiscals 2019 and 2023: The aggregate AUM of the Indian mutual fund industry has grown at a healthy pace between fiscals 2019 and 2023, against the backdrop of an expanding domestic economy, robust inflows, and rising investor participation, particularly from retail investors. Average AUM grew at CAGR of 13.4% to 40,51,147 crore as of March 2023 from 24,48,383 crore as of March 2019. However, growth was slowest in fiscal 2023 at 5.6% year-on-year on account of a tepid equity market.

Note: Values in the chart above are based on quarterly average AUM Source: AMFI, CRISIL MI&A

Net inflow of mutual funds in equity segment continues to remain positive in fiscal 2023: A major event in the form of the NBFC crisis in fiscal 2019 slowed inflows during the year, followed by fiscal 2020, which ended with the disruption caused by the COVID-19 pandemic. In fiscal 2021, led by resurgence of investor interest despite the COVID-19 pandemic, aggregate inflows totaled 2,14,743 crore. Inflows continued to remain strong in fiscal 2022 as well, with 2,46,729 crore flowing in, mainly through equity funds. However, debt mutual funds witnessed heavy outflows upto 1,84,252 crore in fiscal 2022 due to lower returns and rising interest in equity market which showed strong growth. The trend continued in fiscal 2023, where debt mutual funds and liquid funds witnessed outflows of 1,11,808 crore and 94,404 crore respectively as they offered muted returns to the investors owing to tightening of monetary conditions both globally and in India due to rising inflations. On the other hand, in fiscal 2023 equity mutual funds witnessed second highest inflows in last five fiscals, marginally lower than fiscal 2022, which reflects continued confidence of investors in equity-oriented schemes despite volatility. Moreover, existing investors continued investing in mutual funds through SIPs.

Retail participation increased with monthly inflows into mutual funds through the SIP route increasing from approximately

11,863 crore in April 2022 to approximately 14,276 crore in March 2023. During the same time, number of SIP accounts increased from 5.39 crore in April 2022 to 6.36 crore in March 2023.

Notes: (1) As per quarterly average AUM data. Equity includes equity funds, ELSS, index funds, solution-oriented funds, and balanced funds. Debt funds include gilt, income, conservative hybrid, floater funds, and FoFs investing overseas. ETF includes gold ETFs and other ETFs. Liquid/money market includes liquid funds, overnight funds, and money market funds (2) Figures in the box represents net inflow for the period; Source: AMFI, CRISIL MI&A

Open-ended funds have contributed maximum to India’s Mutual Fund AUM: Open-ended funds contributed 99.2% of the total AUM as of March 2023. Open-ended funds include debt, equity, hybrid solution and other funds such as index, gold ETFs, other ETFs and fund of funds investing overseas. In open-ended funds, equity-oriented AUM has the highest share with 38.8% as of 31st March, 2023. Continued investment by existing mutual funds investors and rising retail investors contributed to the growth of equity funds AUM. However, debt mutual funds accounted for 30.2% as of 31st March, 2023 as against 35.1% last fiscal on account of heavy outflows due to subdued returns and rising interest rate scenario. Hybrid, solution-oriented and other funds contributed 12.3%, 0.8% and 17.8% respectively.

Close-ended funds include only debt and equity-oriented schemes and contributes only 0.8% of the total AUM as on 31st March, 2023. Debt-oriented AUM contributes highest at 81.3% towards close-ended AUM as of 31st March, 2023, however the share of equity-oriented AUM has increased from 13.7% as of 31st March, 2022 to 18.7% as of 31st March, 2023 due to continued investments in ELSS scheme. Interval funds also include both debt and equity-oriented schemes. However, since March 2020, the industry is witnessing inflows from debt-oriented interval funds.


Share of passive funds low in industry AUM, but has risen steadily over small base: Unlike the U.S. and other developed countries, where passive asset management garners a larger share, passively managed ETFs and index funds are yet to gain the same level of traction in India. However, with increased awareness amongst investors about passive funds, lower expense ratio and ease of investment, their popularity is increasing with AUM share rising from 1.2% as of March 2015 to 15.96% as of March 2023. With several new index funds and ETFs launched in fiscal 2023, the AUM of passive funds increased to 6,46,732 crore as of 31st March, 2023, having grown at a CAGR of approximately 60.9% between March 2015 and March 2023.

While the space is dominated by institutional investors, retail demand has picked up in the recent past owing to discounts provided through Indian government disinvestment schemes, namely CPSE ETF (Central Public Sector Enterprises Exchange Traded Fund) and Bharat 22 ETF. These schemes are aimed at increasing retail investor participation. The rising interest can also be attributed to the low cost and well-diversified nature of ETFs, namely, gold ETFs and investments in equities beyond India. In addition, they also act as alternatives to actively managed funds. AMCs having higher share of these funds can better cross-sell other products to their retail base and, thus, save on costs incurred for marketing and business acquisition of retail customers. High growth potential of this fund category also makes it attractive for AMCs, and the large chunk of institutional mandates makes managing the funds more profitable.

Note: Passive funds include gold ETFs, other ETFs and index funds. Figures exclude index funds from March 2020. QAAUM has been considered Source: AMFI, CRISIL MI&A

Investors are preferring long-term equity schemes and short-term debt schemes: Equity schemes having age of more than 24 months had the highest share of AUM of 10,34,611 crore as on 31st March, 2023. This shows that investors are preferring long-term investments in equity due to positive returns that equity-oriented schemes have given. Non-equity schemes of age below 6 months having a share of 6,99,478 crore of AUM was the second highest contributor as investors move towards safer debt mutual funds.

Holding patterns suggest retail investors are at par with high net-worth individuals in equity AUM: High net-worth individuals are the highest contributor to the equity mutual fund AUM as of 31st March, 2023. Their share in equity AUM has increased from 36.8% as of March 2022 to 43.7% as of March 2023. Share of retail investors also increased from 37.6% as of March 2022 to 43.4% as of March 2023. This can be attributed to the growing investment in Equity funds through the SIP route.

In terms of debt AUM, corporates emerged as the leaders having total share of 53.2%. However, the demand for debt funds has also gained traction amongst high net-worth individuals owing to the long-term tax benefits of debt mutual funds, diversification of portfolio and flexibility of withdrawal without penalties. The share of high net-worth individuals in debt mutual funds AUM has increased from 36.8% as of March 2022 to 40.7% as of March 2023.

Corporates also had highest share in liquid funds AUM and ETFs AUM with 79.1% and 88.9% of holdings respectively, as of 31st March, 2023. FIIs have the minimum holdings across all types of AUM.

Note: As per quarterly average AUM as of March 2023; Equity includes equity-oriented funds, hybrid funds, solution-oriented funds and index funds; Debt includes debt-oriented funds, gilt funds and fund of funds invested overseas; Liquid includes liquid funds, money market funds and floater funds; ETFs include Gold ETF and other ETFs.


Individuals outpace institutional investors in terms of AUM: Historically, majority of the industry’s assets were held by institutional investors, mainly corporates. However, the share of institutional investors, corporates, banks/financial institutions ("FIs") and foreign institutional investors ("FIIs")/foreign portfolio investors ("FPIs") has gradually declined from 45% as of March 2019 to 40% as of March 2023. This is because, while institutional AUM grew at approximately 9% CAGR over the period, individual AUM saw a faster trajectory of 15% CAGR on the back of rising participation, especially in equity funds. The mutual fund industry has seen increased participation from households in recent years, owing to growing awareness, financial inclusion, improved access to banking channels and increased adoption of technology by distributors.

Share of AUM by investor classification exponential growth of AUM held by individual investors reflects

Category (In crore) March 2019 March 2020 March 2021 March 2022 March 2023
Corporates 10,10,202 10,98,454 14,26,743 16,23,633 15,38,893
Banks/FIs 82,648 76,720 57,703 61,313 31,328
FIIs/FPIs 11,061 5,376 5,782 4,372 4,018
Institutional sub-total 11,03,911 11,80,550 14,90,228 16,89,319 15,74,238
Retail Investors 6,44,595 4,69,630 7,04,351 8,80,037 10,07,230
HNIs 7,09,510 8,20,703 10,22,616 12,00,940 13,60,562
Individual sub-total 13,54,105 12,90,332 17,26,967 20,80,977 23,67,793
Total 24,58,016 24,70,882 32,17,194 37,70,295 39,42,031

Notes: (1) Figures are in crore; (2) Average monthly AUM for the period considered, (3) Individual investors include retail and high net worth individuals ("HNI") investors. Institutional investors include corporates, banks/FIs, and FII/FPIs; Source: AMFI, CRISIL MI&A

SIPs have helped further retail investor participation in the mutual fund space: Several benefits accrue from SIPs, such as avoidance of behavioural weakness during uncertain periods, aggregation of a high number of small amounts of investments, and certain tax benefits in ELSS through SIPs. SIPs have helped grow, diversify net inflow and reduce volatility in the aggregate inflows. The number of SIP accounts increased from 2.6 crore as of March 2019 to 6.4 crore as of March 2023. Monthly inflows through SIP have steadily increased, from approximately 8,055 crore in March 2019 to approximately 14,276 crore in March 2023. Monthly average inflows through SIP grew at CAGR of 12.3% from 7,724 crore in fiscal 2019 to 12,278 crore in fiscal 2023. Moreover, yearly SIP contribution grew at 29.6% in fiscal 2022 post-covid, a momentum that continued in fiscal 2023 as well, where a 25.2% jump in yearly SIP contribution was recorded.

Popularity of equity funds, rising participation of investors, recent investor education initiatives, and apparent benefits of SIPs to households that traditionally did not invest in mutual funds indicate that growth in inflows from SIPs is expected to accelerate over the foreseeable future. This is expected to make SIP an increasingly important component in overall AUM growth.


Channel-wise growth analysis in AUM suggests rise in AUMs under direct plans: In September 2012, SEBI mandated mutual fund houses to offer products through the direct route alongside distributors. Asset managers launched a slew of direct plan offerings from January 2013. Consequently, AUMs of direct plans grew at an annualised 15.4% since fiscal 2019. As of March 2022, AUMs under direct plans represented 45.6% of aggregate industry AUM, up from 41.1% share as of March 2019. However, AUMs under direct plan marginally declined to 44.8% as of March 2023.

Going forward, CRISIL MI&A expects increasing investor awareness and integration of user interfaces through digital channels to lead to further growth in direct plan AUM. Direct plans offer the benefit of lower expense ratios to investors when compared with regular plans.

Rising popularity of direct plans among individual investors: As of March 2023, 74.4% of total institutional investors monthly average AUM accounted for investments through direct plans (up from 70.6% on 31st March, 2019), whereas 23.4% of total individual investors monthly average AUM accounted for investments through direct plans (up from 16.9% as of 31st March, 2019). The growing popularity of direct plans among individual investors can be attributed to various campaigns and investor education initiatives undertaken by the mutual fund industry. CRISIL MI&A believes that the share of direct plan will gradually increase on account of investors looking to reduce costs as compared to investing through regular plans.

Maharashtra has the highest share in total mutual fund AUM in India: As per the state-wise/union territory-wise contribution to AAUM of scheme categories for March 2023, top 5 states having majority share of Indian mutual fund AUM are Maharashtra, New Delhi, Gujarat, Karnataka and West Bengal. Maharashtra has the highest share at 41.4% of the total mutual fund AUM of the country with a total of 16,57,957 crore AUM, followed by New Delhi at 9.3% with a total of 3,72,940 crore AUM, Gujarat at 6.9% with 2,76,921 crore AUM, Karnataka at 6.8% with 2,73,692 crore AUM and West Bengal at 5.2% with 2,08,987 crore AUM. Together, the top 5 states hold a massive 69.7% of the total mutual fund AUM of the country that amounts to 27,90,496 crore AUM.

Opportunities and Key Growth Drivers

India remains to be the fastest growing economy in the world. According to the data released by the National Statistical Office ("NSO") in February 2023, the second advanced estimate for real GDP growth in fiscal 2023 is pegged at 7.0% year-on-year. Despite global slowdown, tightening of monetary conditions and high inflation, India recorded a higher economic growth rate as compared to many peers, owing to relatively strong local consumption, a lower reliance on global demand and continued resilience to external headwinds. The IMF has also forecasted that the country’s GDP will grow at a faster pace compared to other economies in calendar year 2023.

Per-capita income surpassed inflection point: India’s per-capita income crossed the US$ 2,000 threshold in 2021, i.e. the inflection point when income crosses the subsistence expenditure level and moves to spending and investments. India’s per-capita income expanded 7.6% in fiscal 2022. The IMF estimates the country’s per-capita income (at constant prices) would clock a 6% CAGR between fiscal 2022 and 2025, and a nominal GDP per capita (at current prices) would log a 15% CAGR.

A higher per-capita income, prospects of strong economic growth, financialisation of household savings, advancement of technology, and access to capital market products provide support to the investment climate in the country.

Rising household savings to propel the Indian mutual fund industry: According to the World Bank, the savings rate, or the proportion of gross domestic savings ("GDS") in GDP in the Indian economy has trended down in the past decade. However, India’s domestic savings was still higher at 29.3% as compared to the world average of 28.0% at end of calendar year 2021.

CRISIL MI&A expects India to continue being a high savings economy at least over the next decade. CRISIL MI&A expects household savings to increase further in the medium term, as households become focussed on creating a nest egg for the future post the COVID-19 pandemic-induced uncertainty. Further, according to the Securities and Exchange Board of India ("SEBI"), till Q3 of fiscal 2021, the household financial savings deployed in securities market had grown significantly to 1.2% of GDP as compared to 0.3% earlier. Going forward, if the amount of savings deployed in securities market sustains, it is expected to boost the capital markets and economy.

Note: The above data pertains to gross domestic savings rate in percentage for calendar year 2021 Source: World Bank, CRISIL MI&A

India’s gross domestic savings rose at 6.60% CAGR between fiscal 2018 and fiscal 2022

Parameters (In hundred crore) March March March March March CAGR
2018 2019 2020 2021 2022
GDS 54,807 60,003 59,959 57,168 70,767 6.60%
Household sector savings (net financial savings, savings in physical assets and in the form of gold and silver ornaments) 32,966 38,446 39,291 44,347 46,195 8.80%
Gross financial savings 20,564 22,636 23,991 30,544 25,979 6.02%
Financial liabilities 7,507 7,712 7,866 7,775 8,071 1.83%
Net financial savings 13,057 14,924 16,125 22,769 17,908 8.22%
Savings in physical assets 19,442 23,094 22,735 21,194 27,690 9.24%
Savings in the form of gold/silver 467 427 431 384 597 6.32%

Note: The data is for financial year ending March; Physical assets are those held in physical form, such as real estate, etc. Source: MOSPI, National Accounts Statistics, CRISIL MI&A

Capital markets to remain attractive part of financial savings: Between fiscal 2012 and fiscal 2022, the net financial savings increased at a CAGR of approximately 10.8% as compared to approximately 7.2% for saving in physical assets between the same period. This led to a decline in household savings in physical assets from 67.0% in fiscal 2012 to 59.9% in fiscal 2022. During the same period, net financial savings grew from 31.0% to 38.8%. Due to an increase in financial literacy and awareness, the relative outperformance of financial assets over recent years, and the Indian government’s efforts, CRISIL MI&A expects the share of financial assets as a proportion of net household savings to increase over the next five years. The rise in financial assets is expected to further boost the financial investments under mutual funds, equity, pension schemes, insurance and alternate assets.

Note: The data is for financial year ending March;

Source: Handbook of Statistics on Indian Economy 2018-19, RBI, MOSPI, CRISIL MI&A

Annual inflows of household savings into financial assets during fiscal 2019 and fiscal 2022: From fiscal 2019 to fiscal 2021, annual inflows of household savings into financial assets had increased at CAGR of 22%. However, fiscal 2022 witnessed reversal of this trend as inflows into deposits, life insurance and currency declined drastically. But annual inflows of household savings into mutual funds continued to rise and registered a massive growth of 151% in fiscal 2022 to reach 1.6 lakh crore.

Inflows in mutual funds to strengthen with retail participation: Total AUM of retail investors stood at 10,07,230 crore as on 31st March, 2023. It was mainly driven by interest of retail investors in equity oriented and gold ETF mutual fund schemes. Total AUM of retail investors in equity schemes amounted to 8,15,404 crore and accounted for 81.0% of the total retail investors’ AUM at the end of March 2023.

Scheme-wise distribution of aggregate AUM of retail investors and number of folios as of 31st March, 2023

Type of Scheme AUM (In crore) % of total No. of Folios % of total
Liquid Fund/Money Market Fund/ Floater Fund 9,819 1.0% 23,60,672 1.8%
Gilt Fund 1,345 0.1% 1,74,407 0.1%
Remaining Income/ Debt Oriented Schemes 21,529 2.1% 26,59,907 2.0%
Growth/ Equity Oriented Schemes 8,15,404 81.0% 9,15,23,742 68.9%
Hybrid Schemes 1,00,034 9.9% 92,98,705 7.0%
Solution Oriented Schemes 22,630 2.2% 55,80,778 4.2%
Index Funds 2,534 0.3% 46,38,968 3.5%
Gold ETF 17,681 1.8% 35,53,113 2.7%
ETFs (other than Gold) 9,720 1.0% 1,18,35,882 8.9%
Fund of Funds investing Overseas 6,535 0.6% 11,58,721 0.9%
TOTAL 10,07,230 13,27,84,895

Note: Quarterly Average AUM data has been considered Source: AMFI, CRISIL MI&A

Note: Year in above chart represents calendar year Source: AMFI, CRISIL MI&A

In the long term, with expectations of higher returns from the capital markets, the fund flow into equity funds is expected to be high. Increasing share of mutual funds in the financial savings of households, driven by expectations of higher and stable returns, is a key factor that is expected to contribute to fund inflows, especially into passive and equity fund categories.

Factors such as financial awareness and retirement planning to further contribute to the growth of Indian mutual fund industry: The low mutual fund penetration in India is largely due to the lack of awareness. However, the situation is changing for better with various government initiatives towards investor education and awareness. SEBI has directed AMCs to annually set aside at least 2 basis points ("bps") of their daily net assets for spending on investor-education initiatives such as boosting awareness about capital market investment products. Such spending is expected to rise along with growing industry AUM, thereby helping deepen mutual fund penetration among new investors, particularly in B30 markets. The popularity of ELSS, a mutual fund product that helps investors save income tax under Section 80C of the Income Tax Act, 1961, has also grown. CRISIL MI&A believes that investor education, coupled with better risk management and transparency within the mutual fund industry, will boost investor confidence and lead to increased investments and growth in the industry. Moreover, retirement has the potential to significantly improve penetration among households. EPFO’s move to invest 15% of its fresh accretion into ETFs has boosted the industry, thereby illustrating how mutual funds can be promoted as a vehicle for retirement planning in India. The substantial proportion of young population offers huge potential for retirement planning.

Key Challenges and threats

Removal of indexation benefits on debt mutual funds: The government in Budget 2023 brought amendments as per which no Long-term Capital Gains (LTCG) tax benefits will be applicable to debt mutual funds, gold funds, exchange-traded funds, international funds and certain category of hybrid mutual funds. With effect from 1st April, 2023, capital gains made on such mutual funds will be added to income and taxed as per the slab rates applicable. Hence, removal of indexation benefit on debt mutual funds may pose a challenge in near to medium term.

AMCs across India are now facing challenge from the rising pressure from margins: Pricing pressure as a result of competition as well as larger share of passive funds may adversely affect the profitability of Indian AMCs in future. This margin pressure has been created by rising trend in low-cost mutual funds and increasing passive funds in India. For instance, some mutual fund companies launched index funds with total expense ratio of as low as 0.06-0.12%.

Technological shifts in Indian mutual fund industry: There is a paradigm change in the way technology and automation are being embedded in the industry with rapid increase of AI-based services, chat bots, intelligent agents, digital assistants and many other app-driven services. Likewise, there has been a rise in do it yourself (DIY) investors, some of whom prefer to directly invest in the markets instead of opting for the mutual fund route. AMCs in India will need to constantly innovate to foster seamless services, generate alpha and provide ease of investing to overcome this behavioural shift. However, it is also feared that increased implementation and usage of advanced technologies such as robo-advisors may disrupt the industry leading to loss of jobs. It is important to strike a balance so that use technology can stimulate the growth and bring in more efficiencies in the industry rather than disruptions.

Continued volatility in stock market may restrict participation of retail investors: Retail participation and inflows into mutual funds and other market-linked products are heavily influenced by market performance and sentiment as witnessed in fiscal 2023. If high volatility in stock market continues in fiscal 2024, then it could make investors shy away from market-linked products and push them towards assets that are considered to be more risk-averse.

High interest rates will continue to pose a challenge for debt mutual funds in India: Interest rate hikes affect both debt and equity markets. The Reserve Bank of India’s (RBI’s) Monetary Policy Committee ("MPC") raised policy rates by 40 bps in May 2022. This was followed by 50 bps in June 2022, 50 bps in August 2022, 50 bps in September 2022, 35 bps in December 2022 and another hike of 25 bps in February 2023, thus bringing the repo rate to 6.5%. The rate hikes are expected to stand till the end of fiscal 2024. Hence, it would continue to pose risks for mutual funds industry in India. Long-term debt schemes are expected to suffer the most as high interest rates drags down their returns.

Low financial literacy keeps clogging the growth of Indian mutual fund industry: Unless addressed properly, low financial literacy and the lack of awareness is expected to continue hindering the mutual fund industry from capitalising on the full potential of the Indian economy. Mutual funds and other market-linked products need to gain more prominence in India. Regular interactions with the investor community will play a critical role in building trust, retaining investors and increasing penetration. Development of new distribution channels, education initiatives and greater focus on retirement planning will be critical for the mutual fund industry to realise its full potential.

AMCs hesitate retail expansion into B30 markets due to high cost: Expanding into the B30 markets requires substantial investments in marketing and distribution, which could exert pressure on profit margins of fund houses. Innovative mobile/online interfaces to reach out to consumers in these markets could reduce the cost of customer acquisition, compliance and other processes. Further, optimal utilisation of the branch network of banks is expected to play an important role in finding the right balance between online interface and in-person interaction.


In fiscal 2023, India faced volatility in commodity prices and tightening of liquidity. RBI raised policy rates by 250 bps in fiscal 2023, thus bringing the repo rate to 6.5%. The hike in interest rate was a response to both domestic elevated inflation and spill-over risks arising out of aggressive monetary tightening by major central banks.

Debt mutual fund AUM stood at 6.1 lakh crore in fiscal 2023 as against 8.0 lakh crore in fiscal 2022. Fiscal 2023 witnessed net outflow of 1.1 lakh crore in debt mutual fund due to rise in interest rate, lower than trend returns and expectations of policy normalisation on account of rising inflation. The segment witnessed mark-to-market loss of 9.6% in fiscal 2023.

CRISIL MI&A expects fiscal 2024 to be moderately better year for the fixed income segment, as inflation is expected to cool down by the end of fiscal 2024 and no further hike is expected in the interest rates.


Indian benchmarks closed fiscal 2023 with 3.7% and 2.1% yearly returns on the Sensex and Nifty, respectively. Despite markets rising to historical highs in November 2022, yearly returns were capped because of heavy losses in Indian markets in the last quarter. The performance of Indian benchmarks in fiscal 2023 was relatively poor compared to the previous fiscal on account of high inflation across the globe, aggressive rate hikes by central banks and uncertainty caused by the Russia-Ukraine conflict.

Equity mutual funds AUM grew from 13.6 lakh crore in fiscal 2021 to 22.0 lakh crore in fiscal 2023. Fiscal 2023 witnessed net inflow of 2.2 lakh crore in equity fund AUM due to good performance by Indian corporates and increased participation of individual investors. CRISIL MI&A expects equity fund AUM to grow in double-digits in the long-term as government policies and positive economic growth are expected to keep the investors’ sentiments upbeat. However, in medium term external shocks due to global slowdown to remain a key monitorable.

Note: MTM - Mark-to-market Source: AMFI, CRISIL MI&A


In the long-term, i.e., between fiscal 2023 and fiscal 2028, the overall mutual fund industry’s AUM is projected to sustain a high growth trajectory of 15-16% CAGR, reaching approximately 85 lakh crore. This growth is expected to be driven by:

Pick-up in corporate earnings following continued economic growth

Higher disposable income and investable household surplus

Increase in aggregate household savings and share of financial savings within the savings pie

Deeper regional penetration as well as better awareness of mutual funds as an investment vehicle

Continuous improvement in ease of investing, with technological innovations and expanding internet footprint

Perception of mutual funds as long-term wealth creators driven by ‘Mutual Fund Sahi Hai’ campaign

Note: P: Projected; AUM is the average of last quarter for each Fiscal, AUM excluding FoFs – domestic but including FoFs– overseas; Source: AMFI, CRISIL MI&A

Equity AUM to grow at 18-19% between fiscal 2023 and fiscal 2028

In fiscal 2023, quarterly average equity AUM grew by 14.6% on-year to reach 21.97 lakh crore. CRISIL MI&A expects the Equity AUM to grow at 18-19% CAGR, the second fastest growth amongst all MF categories, over March 2023 to March 2028. ETFs are expected to grow the fastest, clocking a 23% CAGR over the next 5 years, as passive investing continues to grow in popularity.

Note: P: Projected, As per quarterly average AUM; equity includes equity funds, ELSS, index funds, solution-oriented funds and balanced funds AUM excluding Fund of Funds – Domestic but including Fund of Funds – Overseas; Source: AMFI, CRISIL MI&A

Debt mutual funds declined in fiscal 2023. Over March 2023 to March 2028, CRISIL MI&A expects the segment to grow at a slower rate of 3-4% CAGR as debt mutual funds will continue to get affected due to high interest rate scenario in the medium term. Moreover, with effect from 1st April, 2023, the government removed the indexation benefits on Long-term Capital Gain on debt mutual funds. This is expected to have some impact on the growth of debt mutual funds in the near to medium term.

Quarterly average liquid/money market funds grew by 3.7% in fiscal 2023 due to heavy outflows. CRISIL MI&A expects the segment to grow at approximately 9-10% CAGR between March 2023 to March 2028.

Note: P: Projected, the data is as per quarterly average AUM. Equity includes equity funds, ELSS, index funds, solution-oriented funds, and balanced funds. Debt funds include gilt, income, conservative hybrid, floater funds, and FoFs investing overseas. ETF includes gold ETFs and other ETFs. Liquid/ money market includes liquid funds, overnight funds, and money market funds. Source: AMFI, CRISIL MI&A

Trend in AUM as well as growth across mutual fund segments till March 2028 (In lakh crore)

FY 2020-21 FY 2021-22 FY 2022-23 YoY growth (Mar 21- Mar 22) YoY growth (Mar 22- Mar 23) March 2028P CAGR (FY 2023-28)
Equity 13.6 19.2 22.0 41.5% 14.6% 51.9 18.8%
Debt 10.2 8.0 6.1 (21.3%) (23.5%) 7.4 3.8%
Liquid/ 5.5 7.0 7.3 27.0% 3.7% 11.2 9.0%
ETFs 2.9 4.1 5.1 43.4% 23.4% 14.3 22.9%
TOTAL 32.1 38.4 40.5 84.8

Note: P: Projected; As per quarterly average AUM. Equity includes equity funds, ELSS, index funds, solution-oriented funds, and balanced funds. Debt funds include gilt, income, conservative hybrid, floater funds, and FoFs investing overseas. ETF includes gold ETFs and other ETFs. Liquid/ money market includes liquid funds, overnight funds, and money market funds.


Mutual Fund Industry revenues to grow at 11%-13% CAGR and PAT to grow at 13%-15%

In fiscal 2023, asset management companies in India are estimated to have recorded their highest ever profits at 10,200 crore as against 9,900 crore in fiscal 2022, which is around 3.1% year-on-year growth. Revenues are also estimated to have risen at 6.5% to reach 20,600 crore in fiscal 2023 as against 19,300 crore in fiscal 2022. However, revenues and profits grew at a slower rate in fiscal 2023 on account of higher base in fiscal 2022. Nevertheless, growth in revenues was mainly driven by increased participation of retail investors, rise in AUMs and improved financial literacy. We expect the industry’s revenue to clock a CAGR of 13-15% from

20,600 crore in fiscal 2023 to approximately 35,000-37,000 crore by fiscal 2028, driven by growth in AUM (mainly in equity funds) and incremental re-allocation of AUM from fixed income to equity-oriented funds, which usually charge higher investment management fee (on actively managed equity funds) than other categories. In addition, increased contribution from SIPs and other revenue streams, including portfolio management services (PMS), alternative investment funds (AIFs) and offshore advisory services, are expected to supplement core growth at a healthy pace, driven by a growing appetite for high-ticket investments in the high net-worth individuals (HNI) segment.

We expect the industry’s profitability to improve and net profit to grow at a CAGR of 13-15% from fiscal 2023 to approximately

19,000- 21,000 crore by fiscal 2028. While the asset management fee is expected to decline with an increase in fund sizes as also rising trend of low-cost ETFs and passive funds, increasing competition and tighter TER regulations and increasing marketing spends; higher operating leverage with AUM moving northward, increase in employee efficiency and operating efficiency with technological advancements would propel profitability.

Note: E: Estimated; P – Projection Source: AMC annual reports, CRISIL MI&A

This report is commissioned by UTI Mutual Fund and prepared by CRISIL Market Intelligence and Analytics (MI&A), a division of CRISIL Limited ("CRISIL"). By viewing, using or accessing this Report you ("user") agree and accept as follows: (i) While CRISIL uses reasonable care in preparing this Report based on the information obtained from sources it considers reliable ("Data"), CRISIL does not guarantee the accuracy, adequacy, completeness, authenticity or timeliness of the Data/Report and is not responsible for any errors or omissions or for the results obtained from the use of the Data/Report (ii) This Report is not a recommendation or investment advice. CRISIL especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL Ratings Limited, which may, in their regular operations, obtain information of a confidential nature. The views expressed in this Report are that of CRISIL Research and not of CRISIL Ratings Limited; (iii) The user takes full responsibility for any use of the Report and CRISIL does not accept any liability whatsoever (and expressly excludes all liability) arising from or relating to the use of any part of the Data/Report by the user; (iv) The user will always use the Report ‘AS IS’ in its entirety and unless the user is specifically permitted by CRISIL in writing the user shall not in any manner: (a) copy, transmit, combine with other information, recompile, publish, reproduce or segregate any part or portion of the Report. The contents of this report are intellectual property and information of CRISIL. Altering or copying of the contents or distributing the report without attribution the source to CRISIL is strictly prohibited and violation will attract legal action.; (b) use the CRISIL brand name, logo or any other CRISIL intellectual property rightsin relation to or in respect of the Report or in any manner that identifies or indicates that CRISIL is the author, developer, publisher or owner of the Report or that CRISIL has released the Report.

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COMPANY OVERVIEW Business Overview

UTI AMC is among the leading players in the Mutual Fund Industry in India with a total AUM of 15.56 lakh crore. It ranks eighth among leading AMCs in terms of Mutual Fund QAAUM with 2.39 lakh crore as of 31st March, 2023. With a rich legacy of around 60 years, we are dedicated to furthering our vision of being the most preferred asset manager. Our extensive product range allows us to cater to our diverse investor base and hence facilitate their journey of wealth creation.

Risks and Concerns

The Company follows a methodical process for recognising and mitigating risks. A detailed risk management framework outlines the specific duties and obligations for each management level in the organisation. All inherent risks are assessed, tracked, and regularly communicated to Management. The Company has effective plans in place to address potential risks based on their likelihood, potential impact, and volatility. Any new or developing risks are reviewed on a regular basis with the Management and the Risk Management Committee of the Board to ensure proper control measures are in place.

Internal Control Systems and Adequacy

Our internal controls are aligned with the needs of our business operations and are appropriate for the applicable regulations, resulting in a smooth and effective conduct of our business. These controls are in place to ensure that our assets are protected, errors and frauds are detected and prevented, and our financial statements are reliable. The Audit Committee oversees all procedures to ensure proper authorisation, documentation, description, and monitoring. Furthermore, our Company has a state-of-the-art infrastructure with automated operations for accounts and management information systems.

Operational Performance Mutual Fund

As of 31st March, 2023, UTI AMC is responsible for managing 68 mutual fund schemes in India, which include Equity, Fixed Income, Liquid, Hybrid and Solutions, ETFs & Index Funds and FoF. The total Quarterly Average Assets Under Management (QAAUM) for all of these schemes is 2.39 lakh crore.

Portfolio Management Services

Our Portfolio Management Services (PMS) business, which was launched in 2004, is an important service that we offer to our esteemed clients. As of 31st March, 2023, the PMS business had a total Assets Under Management (AUM) of 10.53 lakh crore under discretionary, non-discretionary and advisory mandates. Our goal is to provide investment solutions that align with our clients’ risk profile and return expectations, utilising research-based valuation and security selection techniques.

We offer Discretionary PMS to the Employees’ Provident Fund Organisation (EPFO), the Coal Mines Provident Fund Organisation (CMPFO), the Employees’ State Insurance Corporation (ESIC), and the National Skill Development Fund (NSDF), Non-Discretionary PMS to the Directorate of Postal Life Insurance (PLI), and Advisory PMS to various offshore accounts.

Human Resources

In FY 2022-23, we welcomed several campus hires to the workforce, of which nearly half were women. We have also made conscious efforts to optimally use the online professional networks and other niche platforms for recruiting fine and accomplished talent. UTI has always given special emphasis to cross functional hiring from within the organisation which has helped deserving employees widen their skills set and to retain key talent within the Company.

During the last fiscal, our efforts were aligned towards upskilling employees across different career stages through meticulous trainings and programmes. These workshops were aimed to provide holistic growth to new hires through various mentorship sessions and to enable our experienced cadre to be the leaders of tomorrow. Our senior leadership has been a pillar of our enduring success and many workshops with Ivy League colleges have been conducted to provide them with necessary resources to execute their vision for the organisation. Digital has been a key area to bring ease for our employees through cutting edge technology and cloud based applications. Our training modules are closely aligned with the changing trends shaping the future of the industry.

Our organisation’s culture strongly adheres to merit based performance and recognitions. While we provide our employees with a conducive environment that can help them nurture, the merit and transparency based evaluation coupled with round-the-year feedback keeps them motivated to put their best foot forward and give exemplary performance.

As we give a lot of thrust to learning and execution, we also keep a very close watch on the well being of our employees. UTI offers many extensive benefits to its members; for instance, our insurance and child birth benefits are among the best in the industry. To build closely knit bonds, we organise many central and regional events based on sports, culture and others to give them a perfect ambience for such camaraderie.

As of 31st March, 2023 UTI AMC had a strength of 1,377 employees.

Financial Performance Review

Consolidated Financial Performance Review

Particulars FY 2021-22 FY 2022-23
Current Ratio 10.71 13.84
Operating Profit Margin (%) 40.38 37.73
Net Profit Margin (%) 40.25 33.90
Return on Equity (%) 15.52 11.68

Total Income

Total income for the fiscal year ended 31st March, 2023 was 1,290.09 crore, a decrease of 37.18 crore, or 2.80%, from

1,327.27 crore for the fiscal year ended 31st March, 2022. This decrease is primarily due to decrease in net gain on fair value changes. Sale of service as a percentage of total income was 87.70% for fiscal year ended 31st March, 2023 as compared to 84.30% in fiscal year ended 31st March, 2022.

Revenue from Operations

Revenue from operations for the fiscal year 31st March, 2023 stood at INR 1,266.86 crore. The decrease is on account of lower mark to market gain on treasury investment.

Other Income

For the fiscal ended 31st March, 2023 other income was 23.23 crore, an increase of 15.04 crore, or 183.64%, from 8.19 crore for the fiscal year ended 31st March, 2022. The principal reason behind this is the interest received from investments in bonds & government securities which were absent in the previous year.


Fees and Commission Expenses: Fees and commission expenses increased by 0.24 crore, or 9.06%, from 2.65 crore in the fiscal year ended 31st March, 2022 to 2.89 crore in the fiscal year ended 31st March, 2023. This was primarily a result of increase in business support service fees paid to UTI International Limited which is in tandem to the increase in advisory fees received from them. Finance Cost: Finance cost increased by 0.37 crore or 4.03% from 9.18 crore in the fiscal year ended 31st March, 2022 to

9.55 crore in the fiscal year ended 31st March, 2023. This was mainly because of addition & modification in existing lease agreements.

Employee Benefit Expenses: Employee benefit expenses increased by 7.82 crore or 1.92% from 406.71 crore in the fiscal year ended 31st March, 2022 to 414.53 crore in fiscal year ended 31st March, 2023. This was mainly because of increase in employee cost in offshore, NPS & AIF businesses. Employee benefit expenses as a percentage of total income stood at 32.13% for the fiscal year ended 31st March, 2023 compared to 30.64% for the fiscal year ended 31st March, 2022.

Depreciation and Amortisation Expenses: Depreciation and amortisation expenses increased by 3.12 crore or 8.47% from

36.82 crore in the fiscal year ended 31st March, 2022 to 39.94 crore in the fiscal year ended 31st March, 2023. This was mainly because of higher capitalisation of building, various office equipment, furniture & fixture and computer & laptops. Depreciation and amortisation expenses as a percentage of total income stood at 3.10% for the fiscal year ended 31st March, 2023 compared to 2.77% for the fiscal year, ended 31st March, 2022.

Other Expenses: Other expenses increased by 25.83 crore or 12.20% from 211.73 crore in the fiscal year ended 31st March, 2022 to 237.56 crore in fiscal year ended 31st March, 2023. This was mainly because of increase in PFRDA fees in NPS business, travelling and conveyance charges, membership fees and subscription charges, advertisement & business promotion expenses, repair & maintenance expenses and legal fees. Other expenses as a percentage of total income was 18.41% for the fiscal year ended 31st March, 2023 compared to 15.95% for the fiscal year ended 31st March, 2022.

Profit Before Tax: Profit before tax for the fiscal year ended 31st March, 2023 was 585.62 crore, a decrease of 74.56 crore, or 11.29%, from 660.18 crore for the fiscal year ended 31st March, 2022. This decrease is primarily due to decrease in net gain on fair value changes and increase in employee benefit expenses, depreciation, amortisation and impairment expenses and other expenses. As a percentage of total income, profit before tax was 45.39% in the fiscal year ended 31st March, 2023 and 49.74% in the fiscal year ended 31st March, 2022.

Tax Expenses: In the fiscal year ended 31st March, 2023 our tax expenses increased by 20.35 crore or 16.20% from 125.59 crore in the fiscal year ended 31st March, 2022 to 145.94 crore in fiscal year ended 31st March, 2023. The decrease in the current tax was 9.27 crore or 6.36% from 145.65 crore in the fiscal year ended 31st March, 2022 to 136.38 crore in fiscal year ended 31st March, 2023. This was mainly because of decrease in our profit before tax. Deferred tax expenses have increased by 29.68 crore or 147.51% from deferred tax assets of 20.12 crore in the fiscal year ended 31st March, 2022 to deferred tax liabilities of 9.56 crore in fiscal year ended 31st March, 2023 mainly because of decrease in revenue from net gain on fair value changes on investments. Profit After Tax: Profit after tax for the fiscal year ended 31st March, 2023 was 437.36 crore, a decrease of 96.93 crore, or 18.14%, from 534.29 crore for the fiscal year ended 31st March, 2022. This decrease was primarily due to decrease in total income in fiscal year ended 31st March, 2023 as compared to fiscal year ended 31st March, 2022. As a percentage of total income, profit after tax was 33.90% in the fiscal year ended 31st March, 2023 and 40.25% in the fiscal year ended 31st March, 2022.

Cautionary Statement

The statements in the Management Discussion and Analysis section describing organisational objectives, projections, estimates and prediction may be considered as forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to, statements about the Company’s strategy for growth, product development, market positioning, expenditures and financial results, are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company’s actual results, performance or achievement may thus, differ materially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent developments, information or events. To avoid duplication and repetition, certain heads of information required to be disclosed in the Management Discussion and Analysis have been included in the Board’s Report.