Cash inflows in index funds and ETFs saw an uptick of almost Rs 4,000 crore between April and May, which took the net AUM for these funds from Rs 3,20,000 crore to almost Rs 3,55,000 crore.
New scheme launches in the equity/growth and the passive investment segments saw a significant rise in the inflows for May 2021. The resoundingly positive investor sentiment, which was reflected in the recent monthly data release by AMFI (Association of Mutual Funds of India) is also a testament of strong market growth in India, with BSE Sensex rising 2,700 points last month and NSE Nifty following behind with a 774-point increase in the same time.
Consider this. Only 1 new scheme in the equity segment was launched in April 2021, which mobilised almost Rs 35 crore. In contrast, three new launches in the equity/growth fund category raked in almost Rs 3,125 crore in May 2021.
The passive investing sector, which constitutes Index funds, ETFs (Exchange Traded Funds), and the like, also saw a solid uptake, with seven new schemes garnering more than Rs 2,300 crore in May. The segment was only able to collect Rs 82 crore last month via three schemes.
Thanks to the ease of understanding money and investing, facilitated by technology and digitisation, more and more people are entering the market and participating in mutual funds. With the pandemic easing its grip on people’s lives, individuals have renewed their focus on strengthening their financial health and planning their money with a long-term perspective in mind.
In fact, industry trends suggested that 88 percent of all equity-oriented equity assets were attained from individual investors, including retail and HNIs (High-Net-Worth Individuals), who are investors who invest in the market with a ticket size of more than Rs 2,00,000.
Cash inflows in index funds and ETFs saw an uptick of almost Rs 4,000 crore between April and May, which took the net AUM (Asset Under Management) for these funds from Rs 3,20,000 crores to almost Rs 3,55,000 crore.
Pune-based personal finance strategist Nema Chhaya Buch advocated for new investors who are entering the market to start with Index funds and ETFs. “Such funds are low-cost options and are also in line with market movements. Also, the risk of newly launched actively managed funds is that there is no established track record. Since a novice investor may not completely understand the investment style and strategies employed to manage active funds, to begin with, Index funds or ETFs can become the portfolio core for the long term. Once they get a better understanding of the market, they can also start investing in active equity funds”, she elaborated.
The equity-oriented schemes also saw a net inflow of around Rs 3,500 crore, as redemptions fell to Rs 15,550 crore, in contrast to Rs 18,000 crore that were redeemed from various equity schemes last month. This also boosted the overall AUM for growth/equity-oriented schemes by almost Rs 1,000 crore to Rs 10,67, 899 crore. Freelance journalist Ayushi Malik, who began investing in the equity market last month, is also upbeat about returns on her funds. “I am looking to invest in the market for a long time and not liquidate my investments in the next 1-3 years. I have been told that equity outperforms all other asset classes in terms of returns in the long run and it seems like a sensible choice to invest in funds where high returns can be achieved”, she signs off.