Indian asset managers' shares are trouncing global peers this year as domestic money managers benefit from the tectonic shift in savings to stocks and bonds from gold and real estate.
Reliance Nippon Life Asset Management Ltd. and HDFC Asset Management Co., whose shares have more than doubled in 2019, are the third- and fourth-best performers among 36 peers with a market value of at least $2 billion, data compiled by Bloomberg show.
Retail investors piled into mutual funds after the government ban on high-value currency bills in 2016 hurt returns from gold and property. While total assets have more than tripled to $382 billion in the past five years, only 1.5% of Indians own funds, suggesting a long runway for growth. And passive investing that's decimated fees for U.S. managers is still to take hold in India.
"Mutual funds have become an asset class of choice with policy makers pushing for the formalization of savings," Sundeep Sikka, chief executive officer of Reliance Nippon, said in an interview. The decline in deposit rates has also made funds more popular than other financial products, he said.
The parabolic surge in Reliance Nippon and HDFC Asset is also down to the fact that the duo is India's only listed fund houses. The shortage could ease after UTI Asset Management Co. goes public next year.
The two stocks have come off their peaks in recent days as above-average valuations deterred buyers. Problem is, they're still expensive relative to history and trade at prices slightly above their 12-month targets, data compiled by Bloomberg show.
That's as inflows to equity funds, the most profitable category for asset mangers, shrank to the lowest in over three years in November even as the benchmark index hit new highs.