Mutual funds add 3 crore folios to FY22 due to sharp rally in equity market, digitization
Data from the Association of Mutual Funds in India (AMFI) shows that this is a significant increase from 2020-21, when 81 lakh accounts (or folios in mutual fund terms) were opened.
The current financial year also looks promising in terms of folios, as the growth of investor accounts will allow people to move beyond fixed deposits and savings accounts, said Preeti Rati Gupta, founder of LXME, a financial platform for women.
She said factors such as market conditions, geopolitical conditions, inflation rates, investment financing and growing public awareness will have an impact on the industry.
If retail investors expect the market to be volatile with the change in interest rates, then the folio is expected to decline, said Swapnil Bhaskar, Head of Strategy at Neo-Millennial-Focused Neo-Banking Fintech.
What the data says
According to the data, the number of folios with 43 fund houses increased from 9.78 crore in March 2021 to 12.95 crore by March 2022, recording a profit of 3.17 crore in a year. The industry crossed the 10 crore folio milestone in May 2021. The number of folios under equity, hybrid and solution oriented schemes, the maximum investment in the retail sector as on March 2022, was around 10.34 crore.
Folios are numbers assigned to individual investor accounts. The investor may have multiple folios. Mutual fund space has been experiencing steady growth in folio numbers over the past few years. It added 73 lakh in 2019-20, 1.13 crore in 2018-19, 1.6 crore in 2017-18, 67 lakh in 2016-17 and over 59 lakh in 2015-16.
Some tailwinds supporting the industry include growing mutual fund (MF) awareness, robust distribution platforms and the ease of transaction through digitization, further driven by the Kovid-19 epidemic.
According to Gupta of LXME, multiple factors such as the increase in digitization, the availability of easy-to-use information, increased awareness and the transition from traditional instruments to mutual funds as investors expect better returns have led to the growth of MF folios. Based on past market performance despite the epidemic continuing.
“Amfi’s ongoing ‘Mutual Fund Sahi Hai’ campaign and other investor awareness programs undertaken by asset management companies (AMCs) have been instrumental in connecting the industry with a wide range of people to emphasize the importance of investing in MFs,” said Sougata Chatterjee, Chief Business. Officer, Nippon India Mutual Fund.
Also, he said the industry has been able to attract new investors as AMCs further expand their branch network and increase distribution touchpoints across the length and breadth of the country.
Jimmy Patel, Quantum AMC, MD and CEO, said as interest rates moderate, investors are looking at options that go beyond traditional avenues. Furthermore, the increased awareness about mutual funds has helped in increasing the participation of retail investors.
He said volatility in the market and global turmoil had not prevented Indian investors from pouring funds into the market through the mutual fund route. It shows the confidence and confidence of investors in the Indian growth story.
In addition to 3.16 crore, 1.95 crore folios were added in equity-based schemes. Investor accounts in equity-based schemes (open and close-ended) increased from 6.68 crore in March 2021 to 8.63 crore in March 2022.
‘Clear choice for investors’
Himanshu Srivastava, Managing Research Associate Director, Morningstar India, said that while returns from other asset classes were less impressive, equity, with its remarkable performance, had become a clear choice for investors.
He suggested that since mutual funds are the most convenient and best way to invest in equities, more and more investors are investing in it. Due to the low interest rate climate, equity markets have seen strong participation from retail investors looking for higher returns.
As a result, the mutual fund industry has seen an increase in equity folio counts, said Chatterjee of Nippon India Mutual Fund. In addition, many MF investors are diversifying to expose their portfolios to other index and international funds, which also supports folio count growth, he said.
Despite strong growth in folio count over the last few years, MF prevalence has remained low, with less than 3% of the Indian population having MF exposure. In addition, the number of loan based schemes (open and close ended) folios increased by 12.31 lakh to 88.4 lakh during the period under review.
In the debt category, liquid funds continued to top the chart with 22.29 lakh folios, followed by short-term funds (12.26 lakh), ultra short-term funds (7.99 lakh), short-term funds (7.13 lakh) and short-term funds (6.98 lakh). In terms of top asset management companies, Nippon India achieved the highest growth in investor folios in MF FY22. Its investor folios increased by 70.22 lakhs to 1.7 crores by March 2022.
This was followed by Axis MF adding 47.81 lakh investor accounts to 1.28 crore, while ICICI Prudential MF’s folios increased from 33.29 lakh to 1.47 crore. The average assets under management of the industry increased from ₹ 32.17 trillion in March 2021 to ₹ 37.7 trillion by March 31, 2022.
April 17, 2022