With increasing digital access and growing awareness of mutual funds, asset management companies (AMCs) added nearly 70 lakh investor accounts in the first five months of the fiscal year. course, bringing the total to 13.65 crore. This follows the addition of 3.17 crore investor accounts in 2021-2022 and 81 lakh accounts (or folios in mutual fund parlance) in 2020-21, according to data from the Association of Investors. mutual funds in India (Amfi).
The surge in the number of mutual fund (MF) portfolios means that a large number of new investors are entering the capital markets and adopting mutual funds as their preferred investment vehicle. “Demonetization has led to the financialization of household savings, further propelled by the pandemic-induced lockdown, the generational shift in risk appetite and savings pattern, with systematic investment plans becoming a mode and a long-term structural bull market are the main reasons why an increasing number of investors are investing in mutual funds,” said Akhil Chaturvedi, Chief Commercial Officer of Motilal Oswal Asset Management.
Priti Rathi Gupta, Founder and MD, LXME, attributed the increase in folios to a number of factors, including increased awareness among people motivated by literacy programs, advertising campaigns, easy-to-consume information, increased digitization and participation of women. Additionally, a shift in mindset from traditional investment vehicles to mutual funds has contributed to the growth of investor accounts. According to the data, the number of folios with 43 fund houses hit an all-time high of 13.65 crore in August 2022 from 12.95 crore in March 2022, registering a gain of 70 lakh during the period. The industry passed the 10 crore folio milestone in May 2021. Post-COVID, Indian stock markets rose sharply, attracting investor interest. Additionally, during recent testing periods, Indian markets have shown better resilience than most other global markets, and this has not gone unnoticed, said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
Industry experts believe that the total folio tally at 13.65 crore has a long way to go. In terms of the investor type composition of mutual fund assets, the share of assets in the retail investor sector increased from 55.2% in March to 56.6% in August. This suggests that individuals are striving to better channel their savings. The number of folios under equity, hybrid and solutions-based regimes, in which the maximum investment comes from the retail segment, stood at around 10.85 crore in August 2022. “We are in the midst of a structural trend with an increase in the participation of retail investors. With higher levels of education and favorable regulations, households have become more aware of the risks,” Chaturvedi added.
Folios are numbers assigned to the accounts of individual investors. An investor can have several folios. The mutual fund space has seen steady growth in the number of folios over the past few years. It saw an addition of 73 lakh investor accounts in 2019-20, 1.13 crore in 2018-19, 1.6 crore in 2017-18, over 67 lakh in 2016-17 and 59 lakh in 2015-16 . Over the years, investors in India have become more cautious with their investments. They have gradually started holding their investments in tough market conditions rather than panicking and pulling out, while increasing their investments when markets are down, Srivastava said.
Sandeep Bagla, CEO of Trust Mutual Fund, said outperformance in equities was the main reason investors opened new portfolios. Additionally, with interest rates low, much of the retail money has shifted from fixed income to equities. The number of folios will continue to increase as long as the market trend is up as mutual fund penetration is still low in India compared to other markets, he noted. In the debt category, liquid funds continued to dominate the chart in terms of number of folios at 17.53 lakh, followed by short duration funds (9.95 lakh), corporate bonds (6.3 lakh), ultra-short duration (6.21 lakh) and overnight funds. funds (6.09 lakh). Motilal Oswal Asset Management’s Chaturvedi believes that mutual funds are first accepted by traditional investors over direct equity exposure.
Moreover, many demat account holders would over time switch to mutual funds, if not already after their initial enthusiasm for trading wore off, he added. According to industry data, the top contributing states to assets under management (AUM) of Rs 39.5 lakh crore in the industry are – Maharashtra, New Delhi, Gujrat and Karnataka. Additionally, there is a strong attraction of small town investors investing in mutual funds.
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