Speaking at Moneycontrol’s Mutual Fund Summit in Mumbai on October 11, Ananth Narayan G, whole-time Member, Securities and Exchange Board of India (SEBI) congratulated the mutual fund (MF) industry for the progress made, a phenomenal growth in assets under management (AUM) and the number of unique investors being among the many achievements. At the same time, he stressed that the road ahead is long and there are many opportunities and threats that the industry has to tackle.
Surging growth
Highlighting some numbers in support of his point, Narayan highlighted that the industry’s AUM expanded from Rs 22 lakh crore in March 2020 to Rs 48 lakh crore by September 2023. Over the same period, the number of unique investors too has grown, from 2.2 crore to 4 crore. He also said lauded the MF industry for being “a fantastic ambassador for the securities market” by helping with financial inclusion within the securities market ecosystem. This, he said, was reflected in the jump in the number of unique demat accounts from 4.2 crore in March 2020 to 8.9 crore by September 2023.
But he cautioned that there are some sobering facts that need to be taken note of as well.
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Talking in the context of financial inclusion, he said given that there are 51 crore accounts where PAN and Aadhaar have been linked nationwide, and there are only 4 crore unique MF investors, there is still a long way to go when it comes to enrolment. Similarly, compared to bank deposits at Rs 200 lakh crore, retail MF assets today stand at Rs 26 lakh crore. This shows the opportunity for growth and expanding the reach of MFs to B-30 locations (beyond the T-30, that is, top 30 locations).
While lauding mutual fund distributors (MFDs) for their important role in the ecosystem, Narayan said that as MFDs get commissions on products, by definition, the incentives are not geared towards having the best asset allocation for clients. Addressing MFDs, he said, “Please ensure this ecosystem continues to have robust checks and balance so that no perverse incentives build up. If you see something, say something because we need to retain the trust of the investor. SEBI is like the policewala who comes last in a Bollywood movie, you are the hero.”
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Informed investors
Then, emphasising one big opportunity, Narayan said that investor education is one area where every industry stakeholder has a role to play. He elaborated, “While the concept of returns has been explained very well, the concept of risk in terms of what the investor feels in the bones has to be communicated to the investor.”
Also, touching upon the topic of 'finfluencers' or online financial influencers, Narayan said that they vex SEBI because they are playing with trust. “If we lose the trust of the average investor, we are doomed. We have to ensure that there is investor education and disclosures so that no one is taken for a ride.”
He ended his talk with this message for the MF industry—do not rest on your laurels. There are huge opportunities and huge threats, and MFs have a crucial role to play in capital formation.
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