Showing a growing traction for mutual funds among investors, the number of folios has grown by over 93 lakh to an all time high of 5.82 crore at the end of June 2017, from the year-ago level, driven by strong participation from retail investors.
According to data from the Securities and Exchange Board of India (Sebi) on total investor accounts with 42 active fund houses, the number of folios rose to a record 5,82,30,384 at the end of last month, from 4,89,24,391 in June end 2016, a gain of 93.06 lakh.
The number of investor accounts stood at 5.54 crore at the end of March quarter.
Folios are numbers designated to individual investor accounts, though one investor can have multiples.
"The increase in folios has come predominantly from the retail category as is evident by the strong double digit growth in folios in equity, balanced and debt categories," Vidya Bala, Head of MF Research at FundsIndia.com said.
"Sharp rally in markets, together with low interest on deposits appear to be luring more investors into mutual funds. However, past data tells us that folios that get added in market peaks may not always stay if the market sees a correction," she added.
Notably, participation from retail investors, especially from small towns, has been growing.
Besides, steps taken by markets regulator Sebi such as giving extra incentives for fund houses expanding into smaller cities, coupled with increasing investor education programmes to increase penetration of mutual funds is paying dividend.
Retail investor accounts - defined by folios in equity, equity-linked saving schemes (ELSS) and balanced categories — grew by over 77 lakh to more than 4.7 crore during the period under review.
Overall, mutual funds have seen an infusion of Rs 93,400 crore, while equity and ELSS alone attracted an impressive inflow of over Rs 28,000 crore. "From a long term perspective, mutual fund in India still has a lot of potential. Mutual fund's AUM/GDP in the US is around 90 percent, 69 percent in European Union, above 50 percent in Brazil, while in India it is still around 13 percent. The scope for growth is obviously very high.
"From a short term perspective, every day more investors are convinced by the advantages of mutual funds, especially Systematic Investment Plans (SIPs)," said Jean-Christophe Gougeon, Director Investment Solutions at Sharekhan.A mutual fund pools the assets of its investors and invests the money on behalf of them. It provides diverse investment instruments like stocks and bonds without requiring investors to make separate purchases and trades.