India’s $3.3 trillion opportunity for global fund houses

This report is taken from CNBC’s ‘Inside India’ newsletter this week which brings you timely and insightful news and market commentary on the emerging powerhouse. Subscribe here.

The world’s fourth largest asset manager, State Street, is said to be… I’m looking To buy a stake in Indian Finance House.

Global companies, from the United States to South Korea, are as well Looking at the list Their Indian business units, building on the boom in the country’s primary market, provide more avenues for fund houses to invest.

The acceleration of the financialization of Indian household savings is driving flows: as more retail investors participate in capital markets, opportunities for asset managers to handle these funds are increasing.

Global consulting firm Bain & Company estimates that retail investor-driven assets in the Indian mutual fund industry will grow to 300 trillion rupees ($3.3 trillion) by 2035 from 45 trillion rupees in fiscal 2025.

Rakesh Buzath, a partner in Bengaluru, said there is a lot of room for growth in the industry, as individual mutual fund assets in India are less than 15% of GDP, compared to 80% in mature economies such as the US and Canada.

Salaried millennials in metro cities and Generation Z are increasingly investing their savings in mutual funds, even shunning direct stocks, the report said. For a large portion of investors, making monthly investments has become part of the discipline. As a result, the share of long-term mutual fund holdings is rising, Payne said.

Investing through structured investment plans, which refers to investing small amounts at regular intervals, Tripled To Rs 2.89 trillion in FY25 from 2021, data from the Mutual Fund Association of India shows.

The Reserve Bank of India has noted that retail investors increasingly prefer investments in stocks, primarily through mutual funds, over traditional savings instruments. The share of mutual funds in total financial savings of the household sector, the RBI said in August He went up To 6% in the year ending March 2023 from 0.9% in fiscal year 2012.

Vivek Sharma, head of international business at Novama Private, said that as the Indian economy grows, surplus income is being invested across the middle class and upper middle class across multiple financial products.

BlackRock, in a joint venture with billionaire Mukesh Ambani’s Jio Financial Services, established Jio BlackRock Asset Management, receive Regulatory approval to launch mutual funds in May this year. In July, it raised more than $2.1 billion across three financing programs.

In an interview with Bloomberg in September, Sid Swaminathan, CEO of the company, said: Geo BlackRock Asset Management said it expects an Indian mutual fund industry To three times In the next seven years.

The growing pool of young long-term investors in India poses an opportunity not only for global fund houses but also for multinational corporations.

The Indian primary market has been extremely hot this year, even as the secondary market has cooled.

The country saw companies raises 11.4 billion across 252 IPOs during the first three quarters of the year, and with several large listings – LG Electronics, Tata Capital, Lenskart – coming in the last quarter, the final amount of money He grew up It is expected to be $19.9 billion higher than last year.

While the controversy over the overpricing of some IPOs continues, experts say strong local liquidity can absorb a large number of IPOs, regardless of their size.

Take the case of LG Electronics’ IPO in India, which was oversubscribed over 150 times.

According to data shared by Indian capital market research firm Prime Database with CNBC, of ​​the Rs 1.6 trillion raised by large IPOs in India in 2025, about 22% was invested through mutual funds.

While companies benefited from IPOs that saw a significant increase in subscription, mutual funds saw a significant rise in their investments. IPO returns to Interest rate in the first three quarters of the year was 17.7%, compared to just 4.4% for the benchmark BSE Sensex, according to an EY report.

The opportunities arising from India’s shift to financial assets do not end here. Experts say the last path that this growing pool of investors could open is the flow of capital into the global market.

Investors in India are also keen to invest in US stocks to participate in topics such as the artificial intelligence boom, or betting on China’s revival, but their participation is limited due to capital control norms.

However, mutual funds allow them to gain exposure abroad – although the cap is $7 billion for the entire industry – said Dheeraj Agarwal, managing director at Ambit Investment Managers.

“Foreign investment vehicles in India are witnessing great traction,” he added.

Given the growing demand and scale of the industry, most experts argue that access to offshore investments is improving for small investors, making the AUM opportunity for global funds more attractive.

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In an exclusive interview, S. said: Krishnan, secretary of the Indian Ministry of Electronics and Information Technology, said the country is focusing on artificial intelligence applications, expanding data centers, and creating jobs through spillover growth.

Evan Feigenbaum of the Carnegie Endowment for International Peace said that there is no major problem facing India and that close relations with Russia are the solution, but India and China have great untapped economic potential.

Stefano Baronci, ACI’s Asia Pacific and Middle East, said flight cancellation issues on Indian carrier IndiGo were a “transitional setback”, adding that India’s air passenger market would drive the region’s growth.

Need to know

Big tech companies are doubling down on investing billions in India. In less than 24 hours, Microsoft and Amazon pledge More than $50 billion for cloud infrastructure and artificial intelligence in India, while Intel said on Monday that it plans to manufacture chips in the country.

Indigo shares fell as thousands of flights were cancelled. The airline passengers in India faced enormous Disturbances It began last Friday as the country’s largest airline canceled thousands of flights due to a change in rules regarding pilots’ rest time. The airline said on Wednesday that operations had stabilized.

Indian central bank reduces interest rate to 5.25% Reserve Bank of India on Friday He cuts The base interest rate was set at 25 basis points, which was in line with economists’ expectations, due to “weakness in some key economic indicators.”

In the markets

The Nifty 50 index was trading 0.5% higher on Thursday as of 1.40pm local time, and is up 9.4% year-to-date. The BSE Sensex rose 0.4% on Thursday and is up 8.4% this year so far.

The benchmark yield on 10-year Indian government bonds was 6.639%, down from a nine-month high of 6.663% on Wednesday.

— Lim Hui Ji

Coming

December 12: CPI data for November. Opening of the IPO of ICICI Prudential Asset Management Co

December 16: HSBC Manufacturing PMI for December

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