The mutual fund (MF) industry in India has been on a remarkable ride, with the assets under management (AUM) growing more than six-fold increase over the past ten years from ₹9.75-lakh crore as of June 2014 to ₹61.16-lakh crore as of June 2024, according to AMFI.

Riding on the trend, share prices of AMC stocks have also done well. Nippon India AMC stock price has gone up over 122 per cent in one year, while HDFC AMC has gone up about 72 per cent during the same period. Other stocks such as ABSL AMC, UTI AMC and Shriram AMC have gone up 85 per cent, 35 per cent and 237 per cent, respectively.

According to analysts, the rise in retail investor participation and the robust performance of the equity markets have significantly boosted the earnings of AMCs. “We expect more retail investors investing into equity markets via AMCs either through lumpsum investment or investments through SIPs,” Gaurang Shah, Senior Vice-President of Geojit Financial Services, told businessline. The markets have been on a song, with the benchmark index Sensex gaining about 22 per cent in the past one year.

Explaining further, Sunil Damania, Chief Investment Officer, MojoPMS, said that systematic investment plans (SIPs) have emerged as one of the most convenient investment methods, contributing to the industry’s growth. For example, he pointed out that in June 2023, SIP monthly inflows were ₹14,800 crore, which increased to ₹21,300 crore by June 2024. Similarly, the number of folios in the industry rose from 14.82 crore in June 2023 to 19 crore in June 2024. “As the industry expands, it naturally benefits the players within it. This growth has enabled AMCs to enhance their market capitalisation, with some AMC share prices increasing by over 80 per cent in the past year.”

Geojit has a Buy call for both HDFC AMC and Nippon India AMC. Post-Q1FY25 results, many analysts have given a thumbs-up to HDFC AMC with a Buy or Add rating. Incred Capital, meanwhile, has come out with a Hold recommendation on HDFC AMC as “there is a limit to further upside for the stock and other stocks offer a better risk-reward ratio”.

Jignesh Shial, Director of Research and Head of BFSI Sector, InCred Capital, said, “We like Aditya Birla Sun Life AMC for its turnaround story. The revamp in management is expected to gradually improve market share movement and profitability, making it risk-reward favorable at the current price.” According to him, most AMCs have outperformed the market in the recent past, led by robust inflows and healthy capital market movement.

Way forward

Damania pointed out that AMCs with higher equity AUM tend to command a premium compared with those managing debt funds. “The strong inflow into the industry, combined with limited investment alternatives, provides a sense of security and stability, suggesting that the mutual fund industry is on a steady growth trajectory.”

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