MUMBAI: The recent surge in the Indian stock market has prompted a sharp rise in investor interest in discretionary portfolio management services (PMS) as they seek higher returns. Over the past two years, the number of investors in discretionary PMS has soared by 58%, rising from 1.22 lakh in April 2023 to 1.92 lakh in April 2025. This influx has driven a significant 37% increase in assets under management (AUM), which grew from Rs 23.5 lakh crore to Rs 32 lakh crore over the same period. In April 2020, the AUM was at Rs 15 lakh crore.
“We’re seeing two main types of clients gravitate toward PMS. Those with sizable mutual fund exposure wanting something sharper and more bespoke, and direct equity investors seeking professional oversight after mixed results with self-managed portfolios,” said Anand Shah, CIO – PMS & AIF at ICICI Prudential AMC.
Post-2020, a large influx of new investors entered the market, driven by increased financialisation and digital access. However, after facing market corrections in 2023, many investors began seeking expert-managed solutions, such as PMS and mutual funds. “Many investors recognised that while stock-picking is tempting, portfolio construction, discipline, and timely rebalancing require professional oversight. This led to a significant uptick in discretionary PMS adoption,” said Deepan Kapadia, CIO-PMS, Spark Capital Private Wealth Management. “Growth of PMS and discretionary PMS has gained traction as investors looked for focused, alpha-generating portfolios. The mushrooming of PMS providers is seen as a response to this demand,” he adds.
As high-net-worth individuals (HNIs) graduate from standardised financial products to more personalised investment journeys, PMS has emerged as a powerful alternative. This is despite the minimum investment in a PMS scheme being Rs 50 lakh per investor, which is taxed at 30% for residents and 39% for non-resident Indians.
Over the past four years, buoyant markets delivered strong absolute returns — and investors in PMS saw not only beta but added alpha. “That positive reinforcement,” Shah notes, “made people realise the value of structured, conviction-based management.”
However, returns aren’t all that good. Last year, the 195 equity PMS reported an average return of 7.8%, compared to a 10% gain in the Nifty 50 index. Interestingly, the inflow of money in PMS has been in fixed income. As of April 30, 2025, around 85% of the total discretionary PMS money, valued at Rs 32.08 lakh crore, is invested in plain listed debt at Rs 27.05 lakh crore, while 11% of it is allocated to listed equity at Rs 3.52 lakh crore. The remaining amount is comprised of unlisted debt (Rs 35,903 crore), unlisted structured debt (Rs 5,902 crore), unlisted equity (Rs 2,026 crore), and mutual funds (Rs 85,335 crore).
“The removal of the indexation benefit from debt mutual funds in 2023 and falling yields has been one of the key factors for investors shifting towards PMS and AIF,” said Nikhil Ranka, CIO-Equity Alternatives, Nuvama Asset Management. He believes, “The primary focus of these investors is to beat inflation and make a post-tax income of 7-7.5%. For these investors, the prime focus is to protect their capital.”
With mutual funds losing their edge after the removal of indexation, PMS offered an institutional framework with boutique-like strategy differentiation, offering the best of both worlds to clients. Shah is pragmatic about what lies ahead. “We are now in a well-discovered market. Every major company has institutional coverage. Generating alpha is harder.”
As PMS becomes more mainstream, new firms continue to sprout across India’s financial services landscape. But with growth comes the inevitable shakeout. Shah believes the differentiators will boil down to four pillars: consistent performance, robust research depth, client-first service, and ethical governance. “In a rising tide, every boat floats. But when markets normalise, and alpha becomes scarce, only well-governed, research-driven firms will command trust and longevity,” he says. “We don’t sell performance—we sell process and conviction,” says Shah. “Alpha is an outcome of that consistency.”
Source: The Financial Express
