The Indian mutual fund industry continues to record impressive growth on the back of rising retail investors' interest in participating in capital markets.
The Indian mutual fund industry continues to record impressive growth on the back of rising retail investors’ interest in participating in capital markets. The growth is driven by a huge increase in mutual funds SIPs. According to an analysis by Nivesh.com, the SIP AUM touched an all-time high of Rs. 4.83 lakh crore in June-end. Over the last year, the SIP AUM has grown 60% and has seen a two-fold jump compared to just Rs. 2.05 lakh crore in June 2018.
The analysis said that monthly new SIPs registered have recorded a new high of 21.29 lakh in June 2021 compared to just 9.13 lakh in June 2020. As a result, total SIP accounts in the last three years have jumped to 4.02 crore as of 30th June 2021, from 2.16 crore in April 2018. This is significant as the quantum of SIPs registered in the 25 years period of 1993-2018 was almost replicated in just three years (2018-2021).
Why SIPs are gaining popularity?
According to Nivesh.com, SIPs have been gaining popularity among Indian savers as they have realised that bank interest rates are on a decline, inflation-adjusted superior returns over the longer term could come only from mutual funds.
Depending on their goals and risk appetite, small savers have been moving their savings to mutual fund SIPs. It also helps in rupee cost averaging and investing in a disciplined manner without fearing market volatility and timing the market.
In terms of overall AUM growth, AUM of equity schemes grew 55% to Rs. 11.27 lakh crore over the last year, aided by growth in markets. Debt-oriented schemes also remained popular for risk-averse investors. Debt schemes make up 43% of the AUM, now growing 12.4% over the last year.
Furthermore, Hybrid schemes have an AUM of Rs. 3.87 lakh crore, which accounts for 12% of the total AUM as of June 2021. These funds saw a growth of 29% in the past year. Hybrid funds are those funds that invest in a mix of equity and debt.
Another distinct trend was the huge interest in investing in overseas markets.
Fund of Funds (FOFs) Investing Overseas saw massive 357% growth in the last year on a low base of Rs. 3,904 crore in June 2020 to Rs. 17,864 crore in June 2021.
Index Funds and ETFs also continued to attract the interest of investors:
Index funds create a portfolio that tracks a market index. These schemes have Rs. 24,947 crore AUM as of June 2021. These funds saw a phenomenal growth of 123% in the past year.
Gold ETFs are exchange-traded funds with gold as the underlying asset. These account for 0.5% of the total AUM and saw a 50% growth in the past year.