Indian fund assets could more than triple to $500 billion in the next five years, with half of that held in global products as investors seek diversified portfolios, the head of ING Groep's Indian fund arm said.
India's booming economy has boosted incomes, while a buoyant stock market has helped draw more household savings into mutual funds in this nation of more than a billion people.
If India sustained its over 8 percent annual growth and savings rate of about 35 percent, the fund industry could easily expand by a quarter annually, Vineet Vohra, chief executive of ING Investment Management (India) Pvt Ltd, said on Wednesday.
This market is potentially on its way to becoming the biggest market outside of Japan, Vohra, whose firm managed assets worth $2.3 billion, told Reuters in an interview.
Indian fund industry, which has attracted top global asset managers such as American International Group Inc and JPMorgan this year, has seen its assets under management surge 81 percent to $140 billion in the 12 months to end-October.
A 43 percent annual rise in the key BSE index in the past five years has lured droves of investors to mutual funds, which gobbled up 4.8 percent of household savings in 2006/07, from 0.4 percent two years earlier, central bank data showed.
Foreign portfolio investors have moved about $16 billion to Indian stocks this year, double that in 2006, and helped the benchmark hit a series of record highs in the past two months.
We are 2 percent of the world (economy) but we put 100 percent of our money in that 2 percent of the world, he said, adding India was the best performing market only once in the last 20 years.
The BSE index has risen 37.4 percent so far this year, but domestic investors are looking to diversify their portfolio by buying into funds that invest overseas.
In February last year, the authorities relaxed rules and allowed Indian funds to invest freely in global stocks, gradually raising the total the industry could invest in foreign stocks to $5 billion.
I can see Indians already shopping around the world, living around the world and probably now investing around the world as well, said Vohra, who joined the firm from Citibank in July.
There are 14 funds now that offer investors exposure to global markets, compared with just two at the start of 2007, while their assets have leapt five times to $2.8 billion.
More the linkages grow, the more you realise that you can't be limited by just one market place, Vohra, whose firm launched a global real estate fund this month, said.
Vohra, who plans to offer more global funds to Indians, said he saw his firm using the international opportunity to grow its asset management, portfolio management and advisory services.
Our chairman has been in the country thrice already in the last 12 months. India is in their minds a story that clearly have to be much bigger than where we are, Vohra said.