Increasing awareness about mutual funds, ease of transactions through digitisation and sharp surge in equity markets have aided asset management companies to add a staggering 3.17 crore investor accounts in 2021-22, with experts saying the trend is likely to continue this fiscal as well.
This was a significant increase from 2020-21 when 81 lakh accounts (or folios in fund language) were opened, according to data from the Association of Mutual Funds in India (Amfi).
The current financial year also seems promising for folios as the increase in investor accounts will enable people to go beyond fixed deposits and savings accounts, says Priti Rathi Gupta, founder of LXME, a financial platform for women.
Market conditions, geopolitical situations, inflation rate, financial financing of investments and increased awareness among people are some of the factors that can have an impact on this industry, she added.
If retail investors are intimidated by the turbulence in the market driven by changes in interest rates, folios are expected to decline, says Swapnil Bhaskar, Head of Strategy, Niyo – a millennium-focused neo-bank fintech.
According to the data, the number of folios with 43 fund houses rose to 12.95 crore in March 2022 from 9.78 crore in March 2021, which registered a profit of 3.17 crore during the one-year period.
The industry passed a milestone of 10 crore folios in May 2021. The number of folios under equity, hybrid and solution-oriented systems, where the maximum investment is from the retail segment, amounted to approximately 10.34 crore in March 2022.
Folios are numbers intended for individual investors’ accounts. An investor can have several folios. The fund space has seen a consistent growth in folio numbers in recent years.
An addition of 73 lakh investor accounts 2019-20, 1.13 crore 2018-19, 1.6 crore 2017-18, over 67 lakh 2016-17 and 59 lakh 2015-16 was seen.
Some tailwinds that support the industry include increased awareness of equity funds (MFs), strong distribution platforms and simple transactions through digitization, which was further driven by the covid-19 pandemic.
According to LXME’s Gupta, several factors have enabled the growth of MF folios, such as increased digitization, access to easy-to-consume information, increased awareness and a shift in thinking from traditional instruments to funds as investors expect good returns based on past market overperformance despite the ongoing pandemic.
Amfi’s ongoing “Mutual Fund Sahi hai” campaign and other investor awareness initiatives conducted by Asset Management Companies (AMC) have been crucial in connecting the industry with wider masses to emphasize the importance of investing in MFs , says Saugata Chatterjee, Chief Business Officer, Nippon India Mutual Fund.
In addition, with AMCs deepening their branch network and increasing distribution contact points across the country, the industry has been able to bring in new investors, he noted.
Jimmy Patel, CEO and CEO of Quantum AMC, said that as interest rates have slowed, investors are looking at alternatives beyond traditional avenues. Furthermore, increased awareness of funds has helped increase the participation of private investors.
He further said that market volatility and chaos around the world have not prevented Indian investors from pushing money into the market through the fund route. This shows investors’ confidence and confidence in India’s growth history.
Of the addition of 3.16 crore, 1.95 crore folios were added in share-oriented systems. Investors’ accounts in equity-oriented systems (open and closed) rose to SEK 8.63 in March 2022 from SEK 6.68 in March 2021.
Although the returns from other asset classes have not been as impressive, equities, with their remarkable performance, proved to be the obvious choice for investors, says Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
Since mutual funds are the most convenient and best way to invest in equities, more and more investors are investing in it, he pointed out.
Given a low interest rate environment, the stock markets have seen strong participation from private investors looking for higher returns. As a result, the fund industry has seen an increase in the number of shares, says Chatterjee from Nippon India Mutual Fund.
Additionally, many MF investors diversify their portfolios to gain exposure to other index funds and international funds, which in turn also supports the growth of the folio number, he added.
Despite the sharp growth in folio numbers in recent years, the penetration of MF is still low, with less than 3 percent of India’s population having MF exposure. In addition, the number of debt-oriented systems (open and closed) folios increased by 12.31 lakh to 88.4 lakh during the period under review.
Within the debt category, cash and cash equivalents continued to top the chart in terms of the number of folios of 22.29 lakh, followed by low maturity funds (12.26 lakh), ultra-short maturity funds (7.99 lakh), corporate bonds (7.13 lakh) and cards term. average (6.98 lakh). With regard to the leading asset management companies, Nippon India MF has seen the maximum growth in investor folios under FY22. Its investor portfolio rose by 70.22 lakh to 1.7 crore in March 2022.This was followed by Axis MF, which saw an addition of 47.81 lakh investor accounts to 1.28 crore, while folios of ICICI Prudential MF grew by 33.29 lakh to 1.47 crore. The average assets under management of the industry rose sharply ₹37.7 lakh crore on March 31, 2022 from ₹32.17 lakh crore in March 2021.