The mutual fund business in India has advanced significantly in recent years due to increasing investor interest, which has been boosted by a strong market environment and favorable economic prospects.
The Association of Mutual Funds in India (AMFI) reports record increase in mutual fund folios, hitting an all-time high of 15,14,21,270 in its monthly report for July 2023.
While the average AUM (AAUM) was Rs 46,27,687 crore in July, the net asset under management (AUM) was Rs 46,37,565 crore.
N.S. Venkatesh, CEO of AMFI, comments on the industry’s upward trend: “The spike in retail investors’ interest in mutual funds has translated into remarkable inflows across scheme categories. Systematic Investment Plan (SIP), which established an astonishing 33,06,337 new SIP accounts this month and received a record-breaking monthly contribution of Rs 15,245 crore, has been the standout performer.
“In addition, the industry’s AUM has increased by 25% YoY, highlighting the importance of mutual funds in the financialization of savings. The mutual fund companies and AMFI’s extensive awareness initiatives are to thank for the significant growth in SIPs.
“Investors in B30 cities are indirectly investing in the stock market through SIPs in equity mutual funds,” Venkatesh continues. Treasury management by banks and corporations is keeping inflows into short-term debt funds up, while hybrid asset classes like multi-asset allocation funds have witnessed a rise in investor interest.
Investors are becoming more and more aware that mutual funds provide a variety of alternatives appropriate for their risk tolerance and investment objectives, and that they may participate in India’s economic narrative by contributing as little as Rs 500 per month.
Key Points From The AMFI Report
• In July 2023, mutual fund portfolios hit an all-time high of 15,14,21,270, up from 14,91,31,708 the month before.
• Retail MF folios (equity, hybrid, solution-oriented schemes) also reached a record high in July 2023, rising to 12,08,50,415 from 11,90,63,434 in June 2023.
• With an average AUM of Rs 23,77,395 crore, retail AUM (equity, hybrid, solution-oriented schemes) was Rs 24,17,268 crore.
In addition, 17 open-ended programmes totaling Rs 6,723 crore were introduced in July. In July, SIP contributions reached an all-time high of Rs 15,244.73 crore, while the total number of SIP accounts reached a record-high 6,80,52,826, up from 6,65,37,033 in June.
Investing Trends
The July statistics coincide with an increase in Demat account opening. The biggest number of new demat accounts registered in 18 months was three million in July 2023. Retail equity investment has been boosted by economic expansion, upgraded infrastructure and real estate development, a younger population, and increased public understanding of the advantages of investing for long-term gain.
Abhijit Talukdar, a Mumbai-based Sebi certified investment adviser, comments on the rise of demat accounts and claims that despite a favorable trend in demat account creation, stock market participation in India remains “abysmally low”.
According to Talukdar, stock market penetration in India is still dismally low at less than 5%, as opposed to 13% in China, 33% in the UK, and 55% in the USA. Therefore, there is still a long way to go before more of the populace in India actively engages in the stock market. Given that the Indian economy is expected to continue growing in the near future, it becomes sense to assume that the stock markets would do likewise.
Therefore, if the number of new demat accounts continues rising month after month, more individual investors would be able to participate in and directly profit from the expansion of the Indian economy.
“Investing is becoming a way of life; youngsters are becoming more and more aware of saving and investing to grow their money,” adds Kartik Parekh, a Sebi-registered RIA. This is due to the fact that everything has gone digital.
The two depositories, CDSL and NSDL, report that 3 million demat accounts were opened in July, which is a 50% increase over the previous 12-month average of 2 million and the largest number since January 2022.
