Investors rush to mutual funds; industry adds 11.45 lakh folios in October

The total number of folios with 42 fund houses in the country rose by 11.45 lakh in October and hit an all-time high of 7.90 crore, according to data provided by the Association of Mutual Funds in India.

Folios are numbers designated to individual investor accounts, though an investor can have multiple accounts. The rise in the number of folios reflects a growing preference for mutual funds among investors.

Over the last few years, the number of investor accounts have increased significantly because of robust contribution from retail investors, especially from smaller towns, and huge inflows into equity schemes.

During the month under review, equity schemes, balanced funds and equity-linked savings schemes (ELSS) added a total of 10.6 lakh folios between them.

This effectively means that 93 percent of the increase in the number of folios came from equity schemes. The number of folios in income funds and gold ETFs actually declined.

"The increase in new folios in October suggests that new investors have overcome their fears and realised that mutual funds still remain one of the most promising and flexible investment products for the long-term," said a fund manager at a domestic fund house.

On the debt front, liquid funds added 66,910 folios last month. Fund managers attributed this increase to a reversal of outflows from schemes in September.

Quarter-end outflows in liquid funds typically get reversed in the subsequent month as banks and companies re-invest their surplus funds that were withdrawn to meet quarter-end financial and advance tax obligations.

Among other debt categories, gilt funds saw a drop of 136 folios in October, while income funds witnessed a drop of 22,153 folios.

In the last month, income funds suffered because of a rise in interest rates and credit-related fears, which led to a fall in folios.