Mutual funds have seen unprecedented inflows in the year so far, with Rs 96,000 crore invested into them in the first seven months of the ongoing financial year. While this may seem eye-popping, ace investor Rakesh Jhunjhunwala says the inflows are slated to grow many times over, and believes that India is in a great position to tackle even FII outflows, owing to retail demand. “I’ve been screaming from 2004, that foreign money is not important. This money which has now started coming in, is just a small cloudburst, it’s going to be tsunami,” he told speaking on the sidelines of an MCX event. Many top experts and research firm alike have pointed out to this financialisation of savings.
In November, the industry AUM hit a new life high of Rs 22.79 lakh crore. The equity AUM has nearly quadrupled from Rs 1.66 lakh crore in April 2014 to Rs 6.56 lakh crore as of November 2017 even though in the same period overall industry AUM rose from Rs 9.45 lakh crore to Rs 22.79 lakh crore. While the inflows have peaked, the profitability of these fund houses have also registered significant improvement, and continues to be on the rise. In the financial year 2016-17, the top six fund houses (in terms of assets under management) saw their net profit jump 22 per cent from an aggregate of Rs 1,778 crore in FY16 to Rs 2,171 crore in FY17.
A recent report by Deutsche Bank underscored how the rising component of Systematic Investment Plans (SIPs) is changing the profile of Indian savings towards equity investments. “The accelerating momentum of inflows into the equity schemes of mutual funds indicates that the financialisation of the domestic savings cycle in India — which began in earnest in 2014 — is becoming deeply entrenched,” Deutsche Bank said in a research note. AMFI data shows that the MF industry had added about 9.05 lakh SIP accounts each month on an average during the FY 2017-18, with an average SIP size of about ₹3,250 per SIP account. In November alone, SIPs contributed to Rs 5,893 crore of the total inflows.
“The mutual fund industry has been among the biggest beneficiaries of demonetisation, which resulted in low interest rates on bank deposits. The move also helped investors shift from physical assets to financial savings. Years of perseverance by industry players and the regulator seems to have paid off, finally,” Bajaj Capital CEO Rahul Parikh told PTI.
“Indian money into the market is going be a tsunami! I think it’s not even reached a flood,” Rakesh Jhunjhunwala told CNBC TV18 in October this year. India’s Warren Buffett is bullish in the whole “financialisation of savings” theme. “Indian money into the market is going be a tsunami! I think it’s not even reached a flood,” Rakesh Jhunjhunwala told CNBC TV18 in a recent interview.