Mutual Fund Industry In India | Growth of Mutual Fund Industry

Mutual Fund Industry In India

If compared with the developed markets, mutual fund industry in India can be said to be still in nascent stage. But in last few years the mutual fund industry in India has seen a good run.

Investment In Risk But Who Cares 

In the end of every advertisement of mutual fund, you must have heard or read the words, “Mutual fund investments are subject to market risks.” But it seems that now the retail investors of the country are ready to bear this risk. This is the reason behind the exponential growth recorded by mutual fund industry in India in recent months. According to the latest data released by Association Of Mutual Funds In India i.e. AMFI, mutual funds witnessed an addition of over 29 lakh investor accounts or folios in the first four months (April to July 2017) of the ongoing fiscal.

Folios are numbers designated to individual investor accounts, though an investor can have multiple folios. According to the AMFI data, till the end of March 2017, there were 4.08 crores folios which rose to 4.37 crores at the end of July. This growth of mutual fund industry is significant because in last whole year i.e. 2016-17 the addition of new folios was 48 lakhs, in 2015-16 this was 43 lakhs and in 2014-15 it was only 25 lakhs, as explained by the following table.

The Rise Of Mutual Funds Industry In India: Addition of Folios

(in lakhs) (AMFI data)

2014-15                     25

2015-16                     43

2016-17                     48

2017-18(April- July)   29

The above table explains that from the beginning of financial year 2014-15, there has been addition of almost 1.45 crores new folios in the mutual fund industry in India.

There are many reasons behind this phenomenal rise and the most important one is the fantastic return generated by equity mutual funds. This return has attracted the retail investors towards equity mutual fund industry in India. If you see the returns of equity mutual fund schemes in last 3 years, the minimum annual return is 10.83%. The maximum return has crossed the 30% annually.

We are presenting here the returns generated by top 5 equity fund schemes and this selection is based on their average annual return generated in last 3 years.

Best Mutual Fund Schemes In Last 3 Years

(% annual return) (Value Research Data)

SBI Small & Midcap Fund- Direct                                        30.03

Motilal Oswal MOST Focused Multicap 35 Fund- Direct     28.94

SBI Small & Midcap Fund- Regular                                      28.37

Motilal Oswal MOST Focused Multicap 35 Fund- Regular   27.69

Aditya Birla SL Banking Fund- Direct                                    26.95

 

You can’t expect such a good return from any other asset class.

Also Read: Should You Invest In Sector Mutual Fund

In bank Fixed Deposits, the annual return has been in single digit and in gold and property the returns have been negative, especially in recent months. This is the second reason which explains the increased interest of investors towards equity mutual funds. One more reason is ease in mutual fund investments due to SIP i.e. Systematic Investment Plan.

SIP is an investment vehicle offered by mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly or quarterly. At this point of time, there are 1.52 crores SIP account with mutual fund industry in India. And this growth has been fueled by first time investors in mutual fund to a great extent.

If you too are a first time investor and planning to make a start, you must read the Seven Guru Mantras.  

According to AMFI data, the average monthly investment in SIP account is Rs. 3,250, and total monthly investment will touch the Rs. 5,000 crore mark very soon.

‘SIP’ping Strategy Works For The Growth Of Mutual Fund Industry: Monthly Investment

(in Rs. Crores) (AMFI data)

April 2017           4,269

May 2017            4,584

June 2017            4,744

July 2017             4,947

The ever increasing investment in mutual fund has helped the AUM i.e. Asset Under Management of MF industry to cross Rs. 20 lakh crores. In May 2014 it was Rs. 10 lakh crores, it means that in only 3 years the AUM of mutual fund industry in India has been doubled. The important factor is that the AUM of only equity schemes has reached Rs. 6.29 lakh crores.

Mutual Fund Industry in India: Small Cities Are Not Behind

According to report of ICRA, the growth of mutual fund industry has been propelled by contribution from small cities (B15) of the country. B15 are those cities which come after the biggest 15 cities of the country. The contribution of B15 cities is 18 per cent of AUM of mutual fund industry in India. In value terms, it is about Rs. 3.6 lakh crores.

“In the last 12 months, B15 towns have witnessed AUM growth of 41.3 per cent or ₹1.05 lakh crore to reach ₹3.60 lakh crore at the end of July, compared with ₹2.55 lakh a year back. The growth has come on the back of special incentives for distributors,” the ICRA note said.

No doubt, the industry’s continuous approach to spread awareness about mutual fund products, especially SIPs, have helped in bringing more investors. I believe that after reading this article, you will also be tempted to contribute towards the growth of mutual fund industry in India.

If you have any question or doubt, feel free to ask in the feedback box. Happy investing.

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