Highlights

• The Indian mutual funds market has witnessed a significant growth with ~AU$2.07 billion collected through SIP in February 2022.
• Fiducian India Fund has outpaced several global indices as it has delivered significant returns over the past decade.
• FID remains confident about its Fiducian India Fund along with optimism for the Indian economy.

The participation of retail investors has seen a staggering growth across countries since the COVID-19 pandemic broke out. This is especially evident in the Indian stock market as the share of individual investors in overall turnover in the cash segment at the National Stock Exchange (NSE), one of India’s top stock exchanges, grew from 38.8% in 2019-20 to 44.7% in April-October 2021.

Zerodha, the largest broker in India, has also recorded staggering growth in the number of customers as it added around 6 million customers in just 1.5 years, while it took Zerodha 10 years to hit the two million figure.

The year 2020 saw a significant shift in retail participation, wherein the number of active investor accounts in India increased by a whopping 10.4 million. Moreover, the trend has also spread into the equity mutual funds space, wherein retail investments rose by 16% in February 2021 as compared to February 2020.

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Growth in Mutual Fund investment

Investment in Mutual Funds (MF) has been underpinned by the Systematic Investment Plan (SIP), which has been gaining popularity among Indian MF investors. SIP helps investors in Rupee Cost Averaging and investing in a disciplined manner eliminating the worry about market volatility and timing the market.

According to the Association of Mutual Funds in India (AMFI), as of 16 March 2022, there are 51.7 million Mutual Fund SIP accounts, and the total amount collected through SIP was ~ ₹ 114.4 billion (AU$2.06 billion) in February 2022.

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The Indian MF Industry has witnessed a sprawling growth in Assets Under Management (AUM) from ₹ 6.75 trillion (AU$121.5 billion) as on 29 February 2012 to ₹ 37.56 trillion (AU$676.08 billion) as on 28 February 2022. This indicates over 5-and-half-fold growth over a decade’s time. 

Moreover, it was reported that the equity AUM under domestic MFs increased by 50% year-on-year to ₹19.8 trillion (AU$356.4 billion) at the end of 2021. This growth is faster than 41% growth in the total institutional equity AUM.

Fiducian India Fund delivers exceptional performance

ASX-listed financial company Fiducian Group Limited (ASX:FID) believes that the Indian economy has emerged in a strong position from COVID-19 with Government fiscal support and the accommodative monetary policy.

These have laid the foundation for a robust rebound in activity in the near term, and longer-term economic reforms coupled with encouraging demographic factors further support elevated growth over the long term.

 Data Source: Fiducian Group, as at 31/08/2021 (Image Source: Copyright © 2022 Kalkine Media®)

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FID’s Fiducian India Fund has delivered strong returns over the past decade and has beaten the benchmark (BSE 100) index along with many other emerging market indices.

Lower correlation of Fiducian India Fund

One of the key characteristics of Fiducian India Fund has been a comparatively low correlation with other markets over the past 10 years. A lower correlation is generally considered to deliver higher benefits through diversification.

Upon comparison, a correlation of 70.0% was found between the Australian stock market and the US stock market over the last decade, and between the MSCI Emerging Markets Index and Fiducian India Fund was found to be 45.5%. The comparison of both correlations indicates that the latter is relatively lower.

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The correlation of Fiducian India Fund relative to various global stock indices is shown below:

Source: Fiducian Website, as at 31/08/2021

Opportunity for investors

FID is eyeing those investors who may consider investing in India as they target broader emerging markets in their portfolios and thus diversify their risk.

FID believes that there are numerous strong tailwinds for the Indian economy, and the IMF forecasts that India will be the highest growing major economy globally in 2021 and 2022.

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Bottom Line

Although equities in emerging markets offer investors exposure to high-growth economies, they should consider the underlying composition of these funds. FID remains optimistic about economic growth prospects for India and believes that its mutual fund investors can gain significant exposure through Fiducian India Fund.

FID stock was noted at AU$8.00 on 21 March 2022.

Fiducian Group Ltd (ASX:FID) beat the market index || Expert Talk with Mr Indy Singh