Japanese financial conglomerates — Nikko, Nomura and Shinsei Bank — are exploring various options to enter the Indian mutual fund market, top mutual fund sources said. Nomura, which has signed an MoU with Life Insurance Corp (LIC), is likely to get a stake in LIC Mutual Fund. Shinsei Bank already has a relationship with India as it runs an asset management business with Guernsey-based UTI International Ltd, a wholly owned subsidiary of UTI Asset Management Company.

“The Indian mutual fund industry has a huge growth potential and foreign players are looking at tapping it,” said Association of Mutual Funds of India chairman A P Kurian. “Some Japan-based pension funds are also looking at investing in India. But they’re likely to come as foreign institutional investors registered with market regulator Sebi. A major reason for the increasing Japanese presence in India is that they are wary of the kind of returns they can hope for in saturated US and European markets,” said a mutual fund source.

It is not only Japanese companies that are making a beeline to enter the growing MF market but European companies are also heading to South Asia. While UK-based Schroder has plans to set up shop in the coming months, Belgium-based KBC Asset Management Company has announced its joint venture with Union Bank of India. Union Bank will have a 51 per cent stake in the joint venture company while KBC will hold the remaining 49 per cent stake.

These new entrants will face tough competition from other foreign players like UBS, Goldman Sachs Group, Morgan Stanley and Credit Suisse, which have been studying the market dynamics for quite some time now.