[K-Investment Targeting India]② Middle Class Accounts for 50% of Consumption and Savings... Mutual Fund Market Growing 25% Annually

Increase in Individual Investors, Government Investment Activation, and Macroeconomic Stability Attractiveness
Acceleration of Financial System Digitalization through Digital India Initiative Policy

Editor's NoteAs the global supply chain is being reorganized due to the US-China conflict, India has rapidly emerged as a market to replace China. India is especially attracting attention as a major investment destination for domestic companies and financial institutions. Last year, India recorded a nominal Gross Domestic Product (GDP) growth of 6.8%, surpassing the United Kingdom to become the world's 5th largest economy. In India, with a population of 1.4 billion, individual investors have surged since the COVID-19 pandemic. Among them, the rapidly growing Indian middle class has recently been increasing their assets through systematic investment plans. Domestic financial companies are also heading to India one after another to capture the assets of the Indian middle class, which is expected to account for 44% of the total population by 2030.

Along with the Indian economy, the financial market is also growing rapidly. In particular, the mutual fund market is growing at an average annual rate of 25%. The driving force behind this market growth is the Indian middle class. As the Indian-style systematic investment plan (SIP) has become a major financial strategy for this group, the Indian stock market continues its structural growth.

Rapidly Growing Middle Class Accounts for 50% of Total Consumption and Savings

The reorganization of the global supply chain combined with the government's strong growth commitment has led to rapid growth in India's manufacturing and financial sectors. Increased tax revenue has also enabled active infrastructure investment. Particularly, domestic economic growth driven by middle-class consumption is expected. The increase in domestic consumption leads to strong growth of Indian companies, and the inflow of domestic investors into the financial market drives stock market growth. The abundant labor force of the young population and the government's long-term economic reform plans are also positive factors.

Domestic financial companies are moving quickly to seize leadership in the Indian market. Along with Vietnam, India is being eyed as a market to replace China. The rapidly growing Indian middle class is the main target. The middle class, which accounts for 50% of India's total consumption and 50% of savings, represented about 31% of the total population as of the end of 2021. It is expected to account for 44% of the total population by 2030.

As of the end of the first half of this year, India has grown to a GDP of $3.4 trillion and a stock market capitalization of $3.414 trillion. The number of securities accounts reached 100 million, and bank accounts reached 1.2 billion. The total assets under management in funds amount to $511 billion, with 140 million fund accounts. Looking at the annual household mutual fund asset growth trend, it showed steep growth from 491 trillion won in 2020, 596 trillion won in 2021, 638 trillion won in 2022, to 742 trillion won as of the end of June 2023.

Surge in Individual Investors Since COVID-19... Popularity of Systematic Stock Investment

The remarkable growth of the Indian stock market recently can be attributed to the increase in individual investors, government investment promotion, and macroeconomic stability. Especially during the COVID-19 period, lockdowns and remote work led Indian individual investors to take an interest in online trading, increasing stock investments. The Indian government's nationwide account policy implemented in 2014 increased the number of citizens holding bank accounts, and the rapid digitalization of the financial system through the Digital India initiative has been a driving force for increasing individual investors' participation in the stock market.

From 2020 to June 2023, individual investors invested approximately 2.8 trillion rupees in the stock market. During this period, stock investments through mutual funds also steadily increased, recording an average monthly investment of 80 billion rupees from 2020 to 2021 and 104 billion rupees from 2021 to 2022. The number of new individual investors increased by 24.7 million from 2020 to 2021, with about 60% concentrated in Western and Northern India.

India's initial public offerings (IPOs) increased by 170%, from 44 in 2020 to 119 in 2021. Between 2020 and 2022, 168 unicorn companies (unlisted companies valued over 1 trillion won) were born, including Upstox, a stock brokerage platform developer; Eruditus, an education tech company; and BrowserStack, a software service analytics company.

Kim Doyeon, a senior researcher at the Center for World Regional Studies, Korea Institute for International Economic Policy, specializing in India and South Asia, explained, "The Indian stock market is expected to grow further based on high economic growth rates, rapid digitalization, and the expansion of financial activities by Indian households. Considering the growth potential of the Indian capital market, we can explore ways to enter the financial and insurance sectors and expand indirect investments."

Mirae Asset Management Settles Among Top 10 Local Operators in India

Currently, among domestic financial companies, Mirae Asset, Shinhan Bank, Woori Bank, and Korea Development Bank have entered India. In particular, Mirae Asset has secured a position among the top 10 asset management companies locally. Mirae Asset Management India is the only independent foreign capital asset manager in India. It is enhancing its expertise by expanding its business not only in fund management and advisory but also in various other areas. As of the first half of this year, it ranks 7th among asset managers with total assets under management of $17 billion. Since 2015, its assets under management have grown 54 times. It manages 48 funds and has a total of 6 million accounts. It operates 22 branches within India.

Following Mirae Asset's success in capturing the rapidly growing Indian financial market, Korea Investment Management and Kiwoom Asset Management are also exploring entry into India. Seo Yooseok, chairman of the Korea Financial Investment Association, said, "Mirae Asset has established itself locally in India, and some other asset managers are actively pursuing entry into the Indian market. We encourage major domestic asset managers to enter the Indian market and are making various efforts at the association level to provide support."

This content was produced with the assistance of AI translation services.