The opening up of branches of fund houses beyond the top 30 towns is also encouraging more people to look at these as a suitable investment vehicle. This is also evident from the surge in the number of folios, said ICRA Analytics.
The retail investors account for a major share of the total number of folios. According to the quarterly data on folio and ticket size available on the AMFI website, the retail investors accounted for nearly 91.3% of the 16.49 folios in the industry as on December 2023, at 15.06 lakh crore. The HNIs account for around 8% at 1.33 lakh crore while institutional investors account for less than 1% at 0.11 lakh crore.
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An investor may have multiple accounts or folios in a single fund or across funds. This is therefore not a count of the number of investors, but the number of accounts, said ICRA Analytics.
On a year-on-year basis, the total number of mutual fund folios increased by nearly 22% from 14.57 lakh crore in March 2023.“Increasing awareness about the various investment options among people, primarily from smaller towns and cities, growing financial literacy, and the surge in interest among retail investors for investing in equities and bonds through the mutual fund route are all contributing to the healthy growth in folios. However, mutual fund penetration is relatively low in the country so there is a lot of scope for growth, “ said Ashwini Kumar, senior vice-president and head of Market Data, ICRA Analytics.He added, “The burgeoning middle class and rising financial literacy coupled with professional fund management capability of mutual funds and regulatory oversight are likely to add confidence thereby prompting more and more people to resort to better financial planning so as to accrue savings and this will lead to a good surge in the number of new folios being added in the coming years.”
The equity-oriented funds stood first on the list of schemes across these folios at 68.7%. ETFs and Fund of Funds together account for 11.7% while hybrid schemes comprise 7.7% as on December 2023. Retail investors had an average ticket size of Rs 84,890 per account in December 2023, almost 20% higher as compared to Rs 70,775 per account in December 2022.
The industry’s total AUM (assets under management) has more than doubled in the last five years at Rs 53.40 lakh crore in March 2024, as against Rs 22.26 lakh crore in March 2020.
The inflows into the equity-oriented schemes grew by nearly 10% to Rs 22,633 crore, up from Rs 20,534 crore last year. This was backed by increasing inflows across various equity-oriented schemes including sectoral, flexi cap and large and mid-cap funds among others, said the release.
The release also stated that the redemptions from equity-oriented schemes have dropped by 21% in the last 5 years from Rs 15.25 lakh crore in March 2020 to Rs 12.06 lakh crore in March 2024.
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The AUM of largecap, midcap and smallcap funds have also witnessed an increase in the last five years. The net AUM of largecap funds increased by 175% to Rs 3.14 lakh crore in March 2024, up from Rs 1.14 lakh crore in March 2020. The surge in AUM was more significant in case of midcap and smallcap funds during the period.
The assets under management of midcap funds grew 350% to Rs 2.97 lakh crore in March 2024 from Rs 0.66 lakh crore in March 2020. The smallcap funds increased by 575% to Rs 2.43 lakh crore in March 2024. It was Rs 0.36 lakh crore in March 2020.
“After a consistent surge in inflows since the beginning of this fiscal, the smallcap funds registered net outflows to the tune of Rs 94 crore in March 2024. This could be on the back of some correction in the segment post the recent Sebi mandate requiring routine stress tests to be conducted on small and midcap funds to highlight the potential liquidity risk associated with these funds when the markets come under pressure,” Kumar said.
“However, we feel that the smallcap and midcap funds, which have witnessed a steady surge in AUM over the last one year, is likely to hold investor interest in the medium to long term due to the value created in the entities supported by robust regulatory framework leading to better corporate governance practices and the government’s firm intent to push for an intrinsic growth in the country’s economy,” he added.
