Mutual funds’ AUM crosses Rs 20.6 lakh crore mark; who is driving the growth? Answer may well surprise

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Published: September 7, 2017 5:17:28 PM

The mutual fund industry's Assets Under Management doubled over the last 3 years and currently stands at Rs 20.6 lakh crore in Aug’17, up from Rs 10.1 lakh crore in Aug’14.

Mutual funds, assets under management, AuM crosses Rs 20.6 lakh crore, participation from retail HNI investors rises, equity and balanced funds, retail, HNI investors Individual investor’s share of overall AuM has increased to 48% from 45% a year ago.

The Indian mutual fund industry has been witnessing phenomenal growth since 2014. The industry’s Assets Under Management (AuM) doubled over the last 3 years and currently stands at Rs 20.6 lakh crore in Aug’17, up from Rs 10.1 lakh crore in Aug’14. “The last three years, and especially the last year, have been characterized by large inflows into equity and balanced funds, with increasing participation from retail and HNI investors. Individual investor’s share of overall AuM has increased to 48% from 45% a year ago,” says Kaustubh Belapurkar, Director-Manager Research, Morningstar Investment Adviser India Pvt Ltd.

SEBI has been taking measures over the last few years to increase mutual fund penetration in smaller cities and getting newer investors into the fold by allowing for an additional 30 bps expense and 2 bps towards investor education. These seem to be paying off as there has been a rapid rise in the number of new folios as well as increasing share of assets from smaller cities (termed at B-15 cities), which now account for 18% of the overall AuM.

“Another trend that we have witnessed is the spectacular increase of flows into mutual funds, especially equity funds, since the demonetization announcement. While this cannot solely be attributed to effects of demonetization, rather a culmination of the combined efforts of the entire industry value chain to reach out to the investors and educate them on the benefits of investing. The move of money into a more formal economy post demonetization has only further helped increase the attractiveness of mutual funds as an investment avenue,” says Belapurkar.

Retail investors are increasingly investing in mutual funds through SIPs (Systematic Investment Plans), which help them reduce market timing risk. Currently the industry receives closes ~ Rs 5000 crore per month through SIPs, which is a very healthy number. Another heartening trend is that unlike earlier market corrections, in the market correction of Nov’16, significant flows came into equity funds and continued to come in through the months after. This can be attributed to increasing awareness and maturity levels of investors. Domestic flows have acted a counterbalance to volatile foreign flows through the year.

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