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L&T MUTUAL FUND
Built on Strong Foundation
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s
India Demographics
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1
Indian : Key Drivers Changing Demographics
This slide is for 2007 if
data not readily avlbl pl
drop
India's working-age population pool is the largest in the world, and is expected to increase significantlyover the next four decades.
Source DATAMONITOR DEC-2010
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4
The domestic market is expected to expand significantly over the next 20 years.
In 2005, people with a disposable income of $10,940 or more contributed just $79 billion in aggregate
disposable income. This is expected to increase exponentially by 2025 to $932 billion.
Aggregate disposable income for households with an income between $4,380 and $10,980 per annum is
also expected to grow exponentially to reach $670 billion by 2025.
Source DATAMONITOR DEC-2010
Disposable Income and Improving Penetration
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SOURCE: CEIC; Haver Analytics; McKinsey Global Economic Growth Database; World Development , Indicators of the World Bank; McKinsey Global Institute
Investment Rate - India & China Leading in World
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SOURCE: CEIC; Haver Analytics; McKinsey Global Economic Growth Database; World Development , Indicatorsof the World Bank; McKinsey Global Institute
Break up of total gross savings rate sector wise % of GDP for 2009
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Break up of total gross savings as % of GDP Trend
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MF Industry Facts & Trends
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Source Karvy Indian Wealth Report Sept 2010
Asset Wise Break up of Individual Wealth In India
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Location Wise Break up of Transactions in 3 Asset Classes
for Top 10 Locations April 2011
Karvy Computershare April 2011
Equity Income Cash
Mumbai 46.10% 43.42% 84.38%
Delhi 17.63% 21.24% 6.79%
Kolkata 17.02% 3.70% 2.20%
Chennai 5.49% 5.21% 1.59%
Bangalore 4.93% 5.36% 1.60%
Hyderabad 1.71% 2.76% 0.35%
Pune 3.81% 2.07% 2.58%
Ahmadabad 1.61% 15.98% 0.48%
Chandigarh 0.82% 0.10% 0.01%
Cochin 0.87% 0.16% 0.02%
Total 100.00% 100.00% 100.00%
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USA
As markets mature , the shares of mutual fund in total assetsonly keeps on increasing.
In 1982, US households had 67% of their assets into cash andbank deposits, which is the present situation in the Indianmarkets.
By 2002, the same fell to 44% as managed assets moved upfrom 22.8% to 42.5% during the same period.
The Boston Consulting Group expects India to follow the USpattern.
Growth trend in Asset Management Business
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41 Fund houses managing AAUM USD 155 Billion
(INR 700538 Crs. As on 31-March-2011)
Annual savings in India USD 533.93 billion (2010)
( roughly 4.5 times 2011 March Closing AAUM still a big scope )
March 10 with with 38 AMCS Closing AAUM USD 171 Billion
March 09 with 25 AMCs Closing AAAUM USD 110. Billion
Mutual Fund Industry - India
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AUM in India is around 12% of GDP as on 2011 (AAUM USD 155 bln V/S Indian
GDP USD $ 1296 ) significantly lower than other market. As markets mature, the
shares of mutual fund in total assets only keeps on increasing.
Awareness of Mutual Fund products are increasing day by day. More
sophisticated products to come in.
Global flavors like ETF gaining currency in Indian mutual funds now. Seen as
next driver of growth.
Long term equity returns are higher than other investment assets
Growth Drivers
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India has 50% savings in Cash & bank deposits (60% in non-urban areas),
significantly higher than 20% in Asia pacific and global average of 13%.
Indian HNIs growing at a faster rate of 13.3% - HNIs invest 31% in equities
Under penetration - 10 cities account for around 80% of total industry AUMs.
Expansion to smaller cities & towns already started
Institutional investors accounts for 65% of AUM. Retail investors yet to be
tapped
14
Growth Drivers.Growth Drivers
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I Phase 1964-87
1963 :Unit Trust of India (UTI) established
1964 :First scheme launched by UTI
1988 :UTI had Rs.6,700 crores of assets under
management.
II Phase 1987-1993
(Entry of Public Sector Funds)
June 1987:SBI Mutual Fund first non- UTIMutual Fund established in followed by others.
End of 1993:Mutual fund industry had assets
under management of Rs.47,004 crores.
III Phase 1993-2003
(Entry of Private Sector Funds)
1993 :First Mutual Fund Regulations came intobeing
1996:Substitued by comprehensive and revised
Mutual Fund Regulations
January 2003:33 mutual funds with total assets
of Rs. 1,21,805 crores
IV Phase since February 2003Aug 2009
2003:UTI bifurcated into two separate
entities
July 2009: 34 funds, managing Rs 5,40,000
crores
V Phase- since Aug 2009After the abolition of entry load
Paradigm change in distribution
Current size: Rs 6,45,000 crs (Dec 10)
41 Mutual Funds
History
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Three waves of growth in the MF Industry
The 1992 -93 wave
The 2000- 2001 wave
The 2006 2008 wave
Whats different now ?
s
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Three pillars that will define the future
Product will prevail
Paperless
Evolution of the Agent to an Advisor
s
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Products
Performance
Properly benchmarked
Peer group comparison
Portfolio
Honest to its investment strategy
Transparency and disclosure
Positioning
Processes
Robust Capable of capturing the beta and the alpha
People
s
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Paperless
Is it very complicated?
Key to the success will be the adoption by Investors as well
as the Advisor
will be encouraged if it adds value to him
Has to be a win win
Applications have to be found which reduce the threat perception forwider usage.
Cost of servicing clients
Releases time for more value added services
Is the Stock exchange platform a threat ?
Convenience to the investor Gives scale and more choices
Improved logistic
24 X 7
s
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Agent to an Advisor
Impact of ban on no load? Short term impact: Shrinkage of business
Long term impact: Huge improvement of credibility
Wide publicity to this event has made Investor aware that
IFA remuneration is now linked to client and not MFs
Therefore seen to be acting in the interest of the client
Financial products are a business of Trust
Why else do AAA rated companies raise money at lower
rates than AA or B+?
The same analogy applies to financial advise
s
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Agent to an Advisor..contd..1
Service that is provided by IFA extends beyond collection of
application
Information at the beck and call of clients
Investment advise
Regular services SOA, Redemptions, Nominations etc
Updates on Dividend declaration
SIP Renewal
Financial Planning
Asset Allocation
Rebalancing
s
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Disclaimers & Risk FactorsThis document have been prepared by L&T Investment Management Limited (LTIML) for
information purposes only and should not be construed as an offer or solicitation of an offer forpurchase of any securities/ instruments or any of the Funds of L&T Mutual Fund. Market views
expressed herein are for general information only and do not have regards to specific investment
objectives, financial situation and the particular needs of any specific person who may have
receive this information. Investments in mutual funds and securities markets inherently involve
risks including possible loss of capital and recipient should consult their legal, tax and financial
advisors before investing. Recipient of this document should understand that statements made
herein regarding future prospects may not be realized. He/ She should also understand that any
reference to the securities/ instruments/ sectors in this document is only for illustration purpose.The views expressed are of LTIML, neither this document nor the units of L&T Mutual Fund have
been registered in any jurisdiction. The distribution of this document in certain jurisdictions may
be restricted or totally prohibited and accordingly, persons who come into possession of this
document are required to inform themselves about, and to observe, any such restrictions.
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Thank You
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