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Online channels key to future asset growth in India


Online channels are likely to become the fastest and most effective way to reach out to the more rural districts of India in the next few years, with social media, blogs, and online advertisements through third-party websites, as well as webcasts and podcasts, already being used.

Such channels are increasingly recognised by managers as the most cost-efficient way to increase awareness of mutual fund products, especially for the smaller firms that might not be able to allocate resources to setting up physical branches in rural districts.
This is happening against a backdrop of a more buoyant mutual fund landscape in India after a strong showing in 2014. Assets under management (AUM) rose by 27.3% year-on-year to INR10.3 trillion (USD166.7 billion), the strongest growth since 2008. Net inflows during the year were estimated at INR247.6 billion.
One of the attractions of India is that only about 50 per cent of total AUM in 2014 came from retail investors and high-net-worth investors. Cerulli Associates estimates that the mutual fund penetration rate in the country is only at about 7.0% of household financial assets.
This leaves a lot of scope for growth in the industry. However, at present, the use of online channels is ostensibly still more educational than transactional. Managers such as SBI Mutual Fund, ICICI Prudential, and DSP BlackRock frequently post videos online-for example, on YouTube-and conduct outreach programs to give investors lessons on the fundamentals of mutual funds.
Meanwhile, another medium that investment professionals intend to use to reach out to the poorer cities in India is smartphones. Research firm eMarketer has predicted that by 2016, India will have at least 200 million smartphone users, the second-largest number in the world after China.
Some managers have already been optimising the use of SMS or mobile messaging application WhatsApp to send key or new product information to their distribution partners in various cities.
Cerulli understands that managers are also exploring direct mutual fund sales via smartphones to make transactions easier and more seamless for investors. Consumers in India are known to have leapfrogged personal computers and gone to mobile, and this medium might be key to reaching out to even more retail investors.

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