More Choice for Mutual Fund Investors

The competition for Indian mutual fund companies is likely to hot up. In addition to battling a weak market, Indian mutual fund companies have to deal with a influx of new players. Though the markets remain weak, there is no dearth of players seeking to have a pie of the Indian financial sector. Recently, the market regulator gave in-principle approval to seven players to set up mutual funds in India, including Edelweiss, Goldman Sachs and Indiabulls.

Yes, but it would be tough ride for the new comers. Though the Indian investors are more and more looking at equities through the MF route, the new comers will have a longer time to make profit, particularly when the growth rate of the industry is decelerating. According to Association of Mutual Fund Industry, a trade body,the growth in asset under management has fallen to 30 per cent in the first quarter of the fiscal, a sharp fallfrom the 50%-plus rates in the previous years.

The new players have to pay a higher distribution cost to push their products in a crowded industry. Besides, as the average fund size decreases, the new players will not have the scale to spread the cost. Have the new players not given these concerns a thought? Or, are they just following the crowd? It could be guessed that some new players would concentrate only on particular market niches. This would mean more choices for the retail investors and more specialized players to look at when looking at a particular asset class.

(Market News India)