It has been two years since the launch of the ‘Mutual Funds Sahi Hai’ campaign in March 2017. And considering the way Indian investors have always invested—in physical assets (gold and real estate) and traditional avenues (viz. Bank FDs PPF, and other small saving schemes)––the Indian mutual fund industry has made commendable progress supported by the confidence of investors in mutual funds as potent investment avenue, particularly for long-term wealth creation.
The cross-media campaign (TV, Digital, Print and other mediums) was brought alive in a conversational style with familiar real-life narratives to explain the benefits of investing in Mutual funds. It resonated well across diferrent states through regional languages.
Moreover, emphasis on investor education by mutual fund houses, and even the distributors and investment advisers, has contributed to the progress the mutual fund industry has made as well as empowered investors.
In a span of two years since the ‘Mutual Funds Sahi Hai’ campaign, the Average Assets Under Management (AAUM) has grown 33% ––from Rs 18.5 trillion in February 2017 to Rs. 24.6 trillion in March 2019.
Graph 1: Average AUM of the Indian Mutual Fund Industry (Rs in Trillion)
as of March 31, 2019
Over the last decade, the AUM of the Indian mutual fund industry has grown from Rs 4.17 trillion as of March 31, 2009, to Rs 23.80 trillion as of March 31, 2019 — a 5½ fold increase.
And if we assess the growth in the Indian mutual fund industry’s AUM in the last five years, since the Modi-Led-NDA government was voted to power in 2014 by a thumping majority, a 3 fold increase is reported.
A part of this growth is, of course, a function of the markets going up. That said, investors too have been exuding confidence, taking the risk, and deploying their hard-earned money in mutual funds in pursuit of better returns, amidst a time when the real rate of return clocked by traditional instruments such as bank fixed deposits do not seem very effective from a financial planning point of view. The rise in mutual fund folios or accounts is testimony of it.
Data as of December 2018 quarter
As on March 31, 2019, the total number of folios stood at 8.25 crore and majority were under equity-oriented schemes, including Equity Linked Saving Schemes (ELSS) and aggressive hybrid funds, accounted for by the individual investors.
4: Scheme-wise composition of assets
Data as of March 31, 2019
Equity-oriented schemes now occupy a dominant portion (over 42.5%) in the scheme-wise composition of assets of the Indian mutual fund industry. It is the individual investors who have a dominant exposure to equity-oriented funds, while institutional investors mainly hold debt-oriented and money market schemes.
Slowly but steadily, the rise in disposable income and increase in life expectancy has changed the way an average Indian investor is investing.
Table: SIP contributions over three financial years
|Month||SIP Contributions (Rs in crore)|
|FY 2018-19||FY 2017-18||FY 2016-17|
|Total during FY||92,693||67,190||43,921|
Data as on April 24 , 2019
The volatility of the Indian equity markets hasn’t deterred individual investors. In fact, by contributing via for Systematic Investment Plans (SIPs) (see table above), investors have managed volatility with the rupee-cost averaging feature of SIPs in their endeavour to compound hard-earned money to accomplish the envisioned financial goals
According to the AMFI data, there are about 2.62 crores (26.2 million) SIP accounts through which investors invest regularly. And there has been an addition of about 9.13 lacs SIP accounts each month, on an average, during the FY 2018-19, with an average SIP size of about Rs 3,070 per SIP account.
[Read: Best SIPs To Invest in 2019]
Retail and High Net-worth Individuals (HNIs) have preferred to take the services of a Mutual Fund distributors / investment advisers, while institutional investors have gone direct.
Interestingly, the participation has been relatively higher from the the B30 locations, i.e. the locations beyond the top 30. Around 65% of the assets from B30 locations and 38% of the T30 assets are in equity schemes as on March 2019.
The capital market regulator has persistently taken a number of measures in the interest of investors, be it:
- Ban on entry load
- Mutual fund commission and disclosure norms;
- Product labelling
- Colour coding to risk-o-meter
- Introduction of Direct Plans for mutual fund schemes
- Categorisation and Rationalisation of Mutual Fund schemes
- Cut down on New Fund Offers
- Diktat on Expense Ratio
…and many more!
The journey ahead…
Going forward, the regulator is likely to take measures that are in the interest of mutual fund investors and the industry, which will boost the confidence of individual investors.
For the Indian mutual fund industry to scale new heights, the collective effort of distributors, investment advisers is necessary. Mutual fund distributors and investment advisers also need to well receive the regulatory changes.
In addition, while conducting mutual fund distribution / investment advisory practice, it is necessary to keep investors’ interest the at the fore at all times, and recommend products based on their needs, risk profile, investment objectives, financial goals, and their time horizon. Also, educate investors on the importance of asset allocation, which is a strategy in itself. This judicious approach can help IFAs gain the confidence of investors.
You see, only when mutual fund distributors and investment advisers earn the trust and respect of clients by following high fiduciary standards at all times, they can grow, their clients can grow, and the Indian mutual fund industry will be able to scale new heights.