Mutual funds crucial in channelling domestic savings for risk capital formation, says Economic Survey

As per the survey, the mutual fund segment presently has more than 10 crore SIP accounts

The capital market has seen a surge in individual and household investor participation since the pandemic years, and investors have traded in equities directly through their accounts, and indirectly through the mutual funds channels, said the Economic Survey 2024-25, which was tabled in Parliament on January 31.

“The mutual fund industry has grown well in the last few years and is now crucial in channelling financial savings towards risk capital formation and leveraging technology and innovation,” the Survey said.

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The rise of retail participation through mutual funds is reflected in the doubling of unique investors from 2.9 crore in FY21 to 5.6 crore as of December 2024.

The document also highlighted that the total number of folios (excluding Fund of Fund domestic schemes) increased from 17.8 crore at the end of FY24 to 22.5 crore at the end of December 2024, and retail investors held mutual fund units worth Rs 18.6 lakh crore.

“This surge in participation, coupled with strong market performance, has led to a remarkable increase in mutual funds’ assets under management (AUM), which rose to Rs 66.9 lakh crore as of December 2024, registering 25.3 percent growth from March 2024,” said the Economic Survey.

As per the survey, the mutual fund segment presently has more than 10 crore Systematic Investment Plan (SIP) accounts, with cumulative SIP inflows of Rs 10.9 lakh crore since inception.

Further, monthly average gross SIP flows have more than doubled in the last three years, from Rs 0.10 lakh crore in FY22 to Rs 0.23 lakh crore in FY25.

“Aided by these sustained inflows, mutual fund ownership in Indian listed companies has risen to a fresh all-time high of 9.5 percent in the quarter ending September 2024, from 8.7 percent in FY24,” the survey said.

On risks for the Indian stock market, the survey said that as we move ahead, the US financial market landscape is characterised by high valuations, record corporate profits and extremely optimistic investor sentiment.

“With the US comprising 75% of the MSCI World Index (as of November 2024), any correction in its market could have profound ripple effects on global markets, including India, underscoring the need for heightened vigilance,” said the survey.