To
realize the potential of the mutual fund industry, AMCs will
have to overhaul their channels of distribution to garner
greater penetration.
The
Indian mutual fund industry is going through a phase of transformation
since liberalization. Liberalization has paved the way for
foreign investors in the mutual fund industry. This has increased
the pace of evolution in the industry and made more products
and services available to investors. Institutional investors
dominate this industry. They hold about 65% of the Indian
mutual fund assets, whereas retail investors account for only
1.3%. The miniscule penetration among retail investors can
be attributed to their lack of awareness and risk aversion
attitude. Until now, distribution has been confined to the
metros, which offer high opportunities. But intensifying competition
and steady growth of mutual funds has forced AMCs to increase
their reach in non-metro cities and small towns, where the
potential is high and penetration is low. To realize the potential
of the retail segment, MF AMCs are beefing up their distribution
channel, which will help them expand their reach.
The
Indian mutual fund industry is worth around Rs.150,000 cr.
It is poised to grow by a CAGR of 8-9%. Savings contribute
about 25% of the GDP to mutual fund assets, which is one of
the highest in the Asian region. This is mainly attributed
to the huge saving tendency among Indians. In contrast, their
investment is lower. Mutual fund players are formulating their
strategies to have a share of the growing market. They are
developing their products for both the mass and the niche
market, considering clients financial goals, risk-taking ability
and time duration. They are meticulously segmenting and targeting
their customers and positioning their products according to
their needs. The segmentation is based on the customers' psychographic
profile, demography/socio-economic conditions. For the mass-market,
AMCs perform psychographic segmentation, which helps in innovating
and developing new products by analyzing customers' expectancy
gap, whereas demographic segmentation helps in launching specialized
or niche products.
Small
families are being targeted using the growth scheme and the
balanced scheme, middle-aged people by pension schemes, and
retired people by income schemes. Usually, government-sponsored,
risk-free products are the preferred option for retail investors.
In contrast, institutional investors prefer to invest in mutual
fund schemes because of the professional management of funds,
wider product mix, high liquidity and cost-efficiency. They
are targeted by institutional schemes and money market schemes. |
