Indian mutual fund assets are forecast to continue their meteoric rise and will more than double over the next five years on the back of strong economic growth, more mature financial markets and a highly competitive distribution system.
Research from Cerulli Associates, a US research house, predicts assets will double to 12,800bn rupees (£154bn, $300bn, 194bn) by 2012, in one of the world's faster growing asset management markets.
"Our projections suggest that the Indian mutual fund market will see an 18 per cent compound annual growth rate over the next five years, and while that may appear modest compared to the recent past, it is important to recognise that in the short term most global asset management markets will see low growth at best," said Shiv Taneja, managing director and head of international research.
At the end of 2007 assets under management reached 5,400bn rupees, up 67 per cent from a year earlier in an industry that has seen rapid expansion over the last three years.
A strong domestic stock market, growing investor awareness and greater mutual fund penetration has helped boost assets under management. Although Mr Taneja expects growth to be slower this year than last, Cerulli predicts it will pick up again by 2009-10.
The international asset management community is also expected to grow in the next few years. According to Cerulli, the country's 33 mutual fund managers - with 16 joint ventures and three wholly owned foreign asset managers - could rise to 50 in the near future.
The battle to expand the mutual fund market will take place in smaller urban centres rather than big cities that are already saturated. It sees the role of independent financial advisers developing over the next five years.
However, Cerulli said a reduction in asset churning would help to build a more sustainable mutual fund industry in India.