The mutual fund industry has added over 81 lakh investors’ accounts in the first two months of the current fiscal (FY25), mainly due to consistent marketing efforts, celebrity endorsements and dedicated work of the distribution network.
Additionally, changing perceptions about fixed deposits, which no longer offer competitive returns compared to mutual funds, and the rise in income levels and accessibility to financial markets have also contributed to the rise in new investors, Trivesh D, COO of stock trading platform Tradejini, told PTI.
Going ahead, the outlook for mutual fund folios remains strong, supported by the ongoing bull run in the stock market, solid risk management practices, continuous investor education, and consistent marketing efforts, he added.
Moreover, the industry will continue to see decent growth as savers increasingly look for alternative avenues to create wealth for their long-term goals, experts said.
“As India’s per capita income grows, investors will look to save money in asset classes, which have the potential to beat inflation and create wealth. As the penetration of mutual funds increases, this will translate into a higher folio base at the industry level,” Abhishek Tiwari, CBO, PGIM India Mutual Fund, told PTI.
According to the latest data with the Association of Mutual Funds in India (AMFI), mutual fund folios of the industry stood at 18.6 crore in May-end, a surge of 4.6 per cent from 17.78 crore registered at the end of March.
This suggests an addition of over 81 lakh folios.
In May, the industry saw an addition of 45 lakh folios compared to 36.11 lakh folios added in April. In 2023, the average monthly addition of folios was 22.3 lakh, making the latest figure more than double this average.
This impressive growth was fuelled by consistent marketing efforts, celebrity endorsements, dedicated work of the distribution network, robust returns given by equities and ease of investing, experts said.
Folios are numbers designated to individual investor accounts. An investor can have multiple folios.
Interestingly, the majority of the new investors are taking the route of digital channels to enter into the mutual fund space. Over the last few years, the surge in mutual fund folios has been led by Gen-Y and Gen-Z investors.
Millennials, also known as Gen Y, are typically defined as those born between 1981 and 1996. Generation Z, or GenZ, are those born between 1997 and 2012.
Overall, the total number of unique PAN and PAN-exempt KYC reference numbers stood at 4.59 crore as of May 2024.
“Investors tend to hold multiple folios, and thus we should look at increasing the total unique number of unique investors in the industry. We believe the growth will come from increasing foot soldiers of distributors and advisers in hinterlands, increased adoption of technology and smartphones and an overall increase in awareness about mutual funds,” he added.
Of the total 81 lakh folios, equity-oriented mutual fund schemes experienced an addition of 61.25 lakh units during the period under review. This has taken the number of such folios to a new high of 12.89 crore, representing 69 per cent of the total.
Investors flocked to equity funds due to the rally seen in the last few years.
Within the open-ended equity funds category, the highest increase in folios was witnessed in the sectoral/thematic funds category. This category added 23.19 lakh folios in the first two months of this fiscal. This was followed by the small and mid-cap categories, which saw a folio addition of 8.04 lakh and 7.74 lakh, respectively.
Also, Hybrid funds added 3.31 lakh folios in the period under review, taking the total count to 1.35 crore. Within the Hybrid Funds category, Multi Asset Funds saw the highest increase of 1.75 lakh folios during the same period.
On the other hand, folios in debt schemes dropped by 72,940 to a total of 70.92 lakh.
Some mutual funds have also outperformed market indices, drawing investors in search of higher returns. This exceptional performance has been a major attraction for existing and new investors aiming to maximize their investment results in a competitive financial market.
Household savings have been on a decline since the Covid pandemic, dropping from Rs 23.29 lakh crore in 2020-21 to Rs 14.16 lakh crore in 2022-23, as people took on more loans for housing, business, and other personal liabilities. Despite this decrease in savings, the mutual fund industry has seen a significant increase in assets, reaching Rs 59 lakh crore.
“While mutual funds are gaining traction for the convenience, diversification and ease of investing, we still have a long way to go,” PGIM’s Tiwari said.
He further said, citing RBI data, that as of FY23, mutual funds represented 6 per cent of total household savings, while direct equities made up 1 per cent. Bank deposits, however, remained the largest portion, constituting 35 per cent of total savings.
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