MF distribution industry moving towards consolidation: Misbah Baxamusa

• June 29,2025

In today's dynamic, tech-driven environment, smaller distributors need robust digital infrastructure and operational support to stay competitive, says Misbah Baxamusa.

India's mutual fund distribution industry is moving towards consolidation, driven by regulations, tech adoption, and rising investor expectations. While short-term panic persists, investor education is fostering long-term thinking. Tier-II and Tier-III cities show growing interest, especially among salaried and first-time investors. Small SIPs often scale over time, highlighting vast growth potential and financial inclusion opportunities.

Original article published on June 29, 2025 in Business Standard.
(https://www.business-standard.com/markets/interviews/mf-distribution-industry-moving-towards-consolidation-125062900430_1.html)

Misbah Baxamusa, chief executive oicer at NJ Wealth, one of India's largest mutual fund (MF) distributors, with assets under management (AUM) of over Rs. 2.5 trillion, tells Puneet Wadhwa in an email interview that they're seeing growing interest from salaried individuals, small business owners, and first-generation earners in Tier-II and Tier-III cities, who are aspirational and open to exploring investment avenues. Edited excerpts:

How would you describe the MF distribution (MFD) landscape in India?

The MFD landscape in India is undergoing a major transformation. While fragmentation remains common - especially among smaller independent distributors - the industry is clearly moving towards consolidation. This change is being shaped by clearer regulations, rising investor expectations for transparency, and, above all, the expanding role of technology (tech). In today's dynamic, tech-driven environment, smaller distributors need robust digital infrastructure and operational support to stay competitive. Our key strategy for the next three to five years will centre on strengthening our platform, expanding investor outreach, and deepening financial literacy.

Do you feel Indian retail investors are becoming more long-term oriented, or is short-term panic still dominant in equity/MF investing?

Short-term panic still heavily influences investor behaviour in India. Despite growing awareness, many retail investors continue to react emotionally to market swings, often making snap decisions that work against long-term wealth creation. While we do see early signs of a shift towards long-term thinking, it requires constant investor education and support. Investors who remain calm, consistent, and disciplined through short-term volatility are usually the ones who benefit most in the long run. As an industry, nurturing this approach will be key to unlocking the full potential of MF investing in India.

Do you see a shake-up or consolidation in the MF and MFD space?

The industry has expanded exponentially over the past 25 years, with AUM rising from Rs. 1.04 trillion in May 2000 to Rs. 72.18 trillion in May 2025. Yet, the AUM to-GDP ratio for 2023-24 stands at just 18.2 per cent - far below countries like the US (131.7 per cent), Canada (90.5 per cent), and the UK (62.5 per cent). The gap becomes even more pronounced when you consider that only 54.9 million people in India currently invest in MFs - a fraction of the population.

These gaps point to enormous room for growth and financial inclusion. The potential for MF distributors is also substantial. Today, there are 180,000 MF distributors - roughly one for every 8,000 people. As MFs reach more households, the number of investors will increase, and so will the demand for distributors to serve them. With stiffer competition, regulatory scrutiny, and rapid digital adoption, the industry is steadily consolidating. Newer and smaller players may struggle to scale or even sustain operations without strong tech systems and investor service capabilities.  

What kind of investor profiles are emerging from Tier-II and Tier-III cities?

In semi-urban and rural areas, awareness of MFs remains low. In many such regions, people still don't know MFs exist as a way to grow their savings. But that's beginning to change. We're seeing growing interest from salaried individuals, small business owners, and first-generation earners from Tier-II and Tier-III cities - people who are aspirational and willing to explore investment avenues. Many begin with small systematic investment plans (SIPs), and with the right handholding, both their confidence and contributions tend to grow over time.

Is there a sizeable conversion rate from Rs. 250 to higher-value SIPs over time?

Historically, we've seen investors start with modest SIPs - say, Rs. 2,000 - and increase their contributions as their confidence grows. We expect Rs. 250 SIPs to follow a similar path. The idea of increasing investments in line with income growth is something we encourage. Rs. 250 SIPs can help turn hesitant first-timers into long-term wealth builders.