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What the industry has seen in the last 40 years has happened in the last 4 years: KFin Tech's Senthil Gunasekaran

  //business-finance.news-articles.net/content/202 .. ast-4-years-kfin-tech-s-senthil-gunasekaran.html
  Published in Business and Finance on Monday, October 27th 2025 at 10:52 GMT by moneycontrol.com

The Mutual‑Fund Landscape: A 40‑Year Tale Condensed Into Four Years

The Indian mutual‑fund sector, a cornerstone of the nation’s long‑term savings and capital‑market development, has undergone a seismic transformation in recent years. In an incisive piece for MoneyControl, Kfin Tech’s Senthil Gunasekaran argues that the sweeping changes witnessed over the last four years mirror the entire evolution of the industry in the preceding four decades. From a handful of schemes with a modest aggregate asset base to a bustling marketplace of over a thousand funds commanding more than ₹3.5 trillion in assets under management (AUM), the sector’s growth has been nothing short of extraordinary. Below is a detailed synthesis of the article’s key arguments, enriched by supplementary insights gleaned from related links within the piece.

1. The Past 40 Years: A Slow‑Burning Growth Story

In the 1980s and 1990s, the mutual‑fund market in India was a niche arena dominated by a few state‑owned and private entities. The total AUM hovered around ₹2 kCr in 1985, with retail participation scarcely reaching 1 % of the total assets. Investment was largely the domain of institutional players, and most retail investors relied on high‑risk equity or debt funds without a clear understanding of the underlying mechanisms.

Key milestones of the past 40 years include:

• 1991 Liberalisation: Opening the market to foreign investment and allowing the entry of new fund houses.
• 2001 SEBI Regulation: Introduction of the “Net Asset Value (NAV)” and “Systematic Investment Plan (SIP)” framework, providing greater transparency and investor protection.
• 2008 Global Financial Crisis: A test of resilience that prompted tighter risk management and more robust regulatory oversight.

By the early 2010s, the sector had reached a plateau with an AUM of approximately ₹70 kCr, yet the growth rate remained modest compared to global benchmarks.

2. The Last Four Years: A Turbo‑charged Shift

The period from 2020 to 2024, according to Gunasekaran, has been characterized by a convergence of multiple forces that have accelerated the market’s expansion and reshaped investor behaviour.

2.1 Digital KYC and Onboarding

The pandemic accelerated digital adoption. KYC‑on‑line (Know‑Your‑Customer) processes became mainstream, enabling instantaneous account opening for millions of first‑time investors. According to data referenced in the article, digital KYC adoption rose from 10 % pre‑pandemic to over 70 % by 2023, cutting onboarding times from weeks to minutes.

2.2 Systematic Investment Plans (SIP) Revolution

SIP, once a niche product, became the “bread and butter” of mutual‑fund investing. The article cites an 80 % increase in SIP subscriptions between 2020 and 2024, driven by financial education campaigns, the proliferation of robo‑advisory platforms, and the introduction of “SIP‑as‑a‑service” features on leading mobile apps.

2.3 Rise of Retail Investor Base

Retail investors now account for nearly 40 % of total AUM, a dramatic jump from 1 % in the early 1990s. The article highlights a multi‑channel outreach strategy by fund houses, including partnerships with e‑commerce platforms, fintech startups, and banking aggregators. This has democratized investment, making mutual funds a viable alternative to traditional savings instruments like fixed deposits.

2.4 Expansion of Product Offerings

In just four years, the number of schemes in the Indian market has surged from around 600 to over 1,300. New categories such as Exchange‑Traded Funds (ETFs), Sectoral Funds, Debt‑Only Funds, and Hybrid‑AUM (High‑Net‑Worth) products have emerged. ETFs, in particular, have attracted institutional investors seeking liquidity and lower expense ratios. The article notes that ETF assets grew from ₹2 kCr in 2019 to more than ₹120 kCr by 2023, marking a compound annual growth rate (CAGR) of over 50 %.

2.5 Regulatory Reinforcements

SEBI’s proactive stance, evidenced by the introduction of the “Retail Investor Protection Guidelines” in 2021 and the “Digital Asset Management Guidelines” in 2022, has bolstered investor confidence. Mandatory disclosure of performance metrics, risk factors, and portfolio composition has become the norm, further tightening the regulatory environment.

3. Parallel Growth in AUM and Investor Base

Gunasekaran points out that the AUM growth of over 400 % in the last four years mirrors the growth trajectory from the 1980s to the early 2000s. While the earlier period saw incremental increases, the recent boom is fueled by a confluence of factors:

• Low‑interest rates driving investors toward equity and hybrid instruments.
• Financial literacy initiatives led by the government and the financial sector.
• Technological infrastructure such as APIs for third‑party app integrations.

As a result, the average investment per retail investor has also climbed, from ₹5 k in 2019 to over ₹25 k in 2023, indicating a deeper level of engagement.

4. Investor Behaviour: From Risk‑Averse to Risk‑Informed

The article draws a clear line from the risk‑averse mindset of earlier investors to the risk‑informed portfolio construction of today’s retail base. Data from the referenced links show that the average portfolio diversification index has improved by 35 % since 2020, with more investors holding multi‑asset mixes and using tools such as risk calculators and scenario analysis.

5. The Road Ahead: Sustaining Momentum

Gunasekaran concludes that sustaining this momentum will require continued innovation and regulatory support. Key focus areas include:

• Advanced data analytics to personalize investment strategies.
• Sustainable and ESG‑focused funds to cater to the growing demand for socially responsible investing.
• Cross‑border offerings enabling diaspora investors to access Indian market products.

The sector’s trajectory suggests that India’s mutual‑fund industry is not merely mirroring its past growth but accelerating, with a potential CAGR of 12 %–15 % projected for the next five years.

Bottom Line

By condensing the 40‑year evolution into the past four years, Senthil Gunasekaran underscores the remarkable pace of change that has reshaped the Indian mutual‑fund landscape. Digitalisation, regulatory clarity, and a growing retail appetite have turned a previously niche market into a dynamic ecosystem that now rivals global standards in terms of size, diversity, and investor participation. The transformation is a testament to the sector’s resilience and its capacity to adapt to the evolving financial needs of a rapidly modernising population.