Dear Investor, did you see the latest data?

It is time to buckle up and watch the biggest disruption in the Indian asset management space unfold over the next 2 years. Strong momentum was building, but as historical data shows, investors are very consistent at missing out on the obvious disruption and keep chasing marginal improvements. So let me just point it out explicitly.

Check out the data below published by Manoj Nagpal of Outlook Asia Capital.

There are several numbers highlighted in both red and green. Twitter was abuzz with speculations on how SBI managed to get to the top of the list. However, the number that truly deserves to be in a large bold gold (or red depending on where your money is invested :P) font in the table is the one at the bottom right corner.

Of every 100 rupees that was invested into Mutual Funds this year, 25.1 went into ETFs.

This number is very significant. About 6 months ago I talked about data that showed that a silent revolution was underway in the Indian ETF space. Most market participants I spoke to after that chose to classify it as a low base effect than the inflection point.

The second most popular argument against ETFs in India is that there is no liquidity. What they really mean is that the volumes are low, liquidity has always been available and continues to be. Again, these people have failed to see the obvious. ETF volumes are growing faster than they have ever before topping 40% a year last year. If the same momentum carried for the next 2 years (evidence points towards acceleration), Indian ETFs will be as liquid as those in any western market and will also match the volumes in other markets.

The AMCs have certainly started to take note and are giving the ETF space a serious thought. Several AMCs are in the process of identifying the right benchmarks and we should see some really good ETFs seeded towards the end of the year.

As you might have the previous one, you can choose to ignore this post as well . That’s okay, because I know you will be convinced when you read my ‘I told you so’ post in 6 months. Till then, keep looking for the ‘Best Mutual Fund’ picked by the ‘Best Algorithm’ written by the ‘Best IITian’ ;)

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