Capital market experienced stellar growth in the last five years, with an increasing number of demat accounts, NSE active accounts, unique mutual fund investors and higher monthly SIP investments, a report by domestic brokerage Motilal Oswal Financial Services (MOFSL) revealed.
According to the brokerage, this marks the start of a sustained, multi-year structural uptrend, fueled by favorable demographic trends as more individuals enter the workforce, contributing to the expansion of the middle class.
The report highlighting the golden era of capital market mentioned that the capital market has benefitted from digital enablers such as E-KYC, UPI, account aggregation, and regulatory reforms which enhanced transparency and security for investors.
Motilal Oswal believes that asset management companies (AMCs), exchanges, brokers, wealth managers, and other intermediaries are well-positioned to capitalise the emerging trends. It said that the entire capital market ecosystem will see sustained growth in revenue (17-45 per cent CAGR over FY24-27). “High cash generation, healthy dividend payouts, and superior RoEs bolster our view in the entire capital market space,” it said.
AMCs – SIPs, bedrock for sustained long-term growth
The brokerage noted that the mutual fund industry’s AUM clocked a 21 per cent CAGR in October 2024, driven by an equity AUM CAGR of 29 per cent over the past five years.
Motilal’s report highlighted that Systematic Investment Plan (SIP) is turning out to be a household name due to MFs.
Strong cash flow generation, high dividend payouts (50-90 per cent) and superior RoEs (over 25 per cent) call for premium valuations in the space. The brokerage has initiated coverage on the sector with a ‘buy’ rating on HDFC AMC, Nippon AMC, Aditya Birla Sun Life (ABSL) AMC, and UTI AMC.
MOFSL emphasised that new product avenues, expansion of reach to lower-tier cities, and widening international presence through offshore funds and passives will provide additional growth triggers.
businessline in earlier reports highlighted that it is time to have passive products on market infrastructure institutions and that the AMCs are going extra mile to launch new schemes beyond sectoral funds.
Multiple growth levers in place for wealth managers
Inter-generational wealth transfer is a key trend that will drive the adoption of organised wealth management, according to Motilal Oswal, as the new generation prefers newer investment avenues – AIFs, PMS, REITs/INVITs, and international investing – over traditional assets such as fixed deposits, gold, and physical real estate.
“With capabilities to serve the customer across asset classes, AUMs and client stickiness are relatively high amongst wealth managers,” the report read.
Motilal Oswal has initiated coverage on Nuvama Wealth with a ‘buy’ rating, while assigned a ‘neutral’ rating to Prudent and Anand Rathi. It has reiterated ‘buy’ on 360 One WAM.
While Motilal Oswal prefers HDFC AMC and Nippon AMC among AMCs, Angel One continues to be its top pick in the broking space.
MOFSL prefers BSE among exchanges, Nuvama and 360 One WAM among wealth managers, and CAMS among intermediaries.
The brokerage has assigned neutral rating on MCX, Anand Rathi, KFin, Prudent and CDSL.
