Those numbers reflect the "great momentum" SIPs have enjoyed in recent years, and point to continued strong prospects, said N.S. Venkatesh, AMFI's chief executive, in an interview.
"SIPs have easily become the ($350 billion fund industry's) biggest product," with yearly inflows approaching 10% of the roughly $140 billion in equity assets under management, said Anthony Heredia, CEO of Mumbai-based Baroda Asset Management India Ltd.
If India's macroeconomic momentum remains on track and the shift to financial assets from real estate and gold continues, the long-predicted narrowing of the gap of mutual funds as a percentage of household assets between India and developed markets such as the U.S. could finally happen, Mr. Heredia said.
Market veterans point to the demonetization campaign India's government announced in November 2016 — removing the 1,000-rupee bills from circulation that had allowed a big chunk of real estate and gold transactions to take place outside of the banking system — as a major factor shifting household assets to financial accounts from those sectors.
Generational change, in an Indian population marked by a relatively young median age of less than 27, is another big factor in play now, market watchers said.
Sanjay Sapre, president of Mumbai-based Franklin Templeton Asset Management (India) Pvt. Ltd., said that in contrast to the financial lessons he learned at his father's knee — that real estate, gold and bank accounts could be counted on while stocks and bonds were too hot to handle — "this generation is growing up with mutualTempleton Asset Management (India) Pvt. Ltd., said that in contrast to the financial lessons he learned at his father's knee — that real estate, gold and bank accounts could be counted on while stocks and bonds were too hot to handle — "this generation is growing up with mutual funds."
SIPs have become more of a consumer product with a compelling story line — that consistent contributions over time will lead to good financial outcomes, agreed Baroda's Mr. Heredia.
By way of example, Mr. Sapre noted in an interview that an estimated 9% to 10% of industry flows into SIPs are coming from individuals choosing funds without the help of an adviser.
Franklin Templeton India had average assets under management of $15.2 billion in the quarter ended Sept. 30. A spokesman for the firm declined to break out the figures Templeton India had average assets under management of $15.2 billion in the quarter ended Sept. 30. A spokesman for the firm declined to break out the figures for SIPs.
Sundeep Sikka, executive director and CEO of Mumbai-based Reliance Nippon Life Asset Management Ltd., said in an interview his firm's focus on SIPs is likewise driven, in part, by the growing willingness of younger Indians to invest in funds. "For them, mutual funds are going to be their first stop," he predicted. Reliance Nippon Life has $63 billion in total AUM.
Market veterans said the growing embrace by India's populace of dollar-cost averaging, or rupee-cost averaging, offers both short-term and longer-term benefits for the country's asset management industry.