Equity mutual funds registered an inflow of over Rs 80,000 crore in April-September 2017, a three-fold growth from the year-ago period, mainly due to the ongoing shift of household savings from real estate and gold to such financial products.
The strong inflows have pushed the asset base of equity mutual funds (MFs) by over 21 per cent to Rs 6.59 lakh crore at the end of September from Rs 5.43 lakh crore in March-end, according to data of the Association of Mutual Funds in India (Amfi).
As per the data, equity funds, which also include equity-linked saving schemes (ELSS), saw net inflows of Rs 80,357 crore in the first six months of the ongoing fiscal, much higher than Rs 22,233 crore infused in April-September 2016-17.
"The increased flow of domestic investor capital in equity mutual funds is a part of the ongoing shift of household savings from physical assets like property and gold to financial assets like equities and bonds, a process that has been accelerated post demonetisation," Bajaj Capital CEO Rahul Parikh said.
"Increased awareness about the principles of asset allocation and financial planning, coupled with the optimism on the long-term growth potential of the Indian economy and its favourable impact on corporate earnings and share prices, has helped drive interest for equities among domestic investors," he added.
Parikh further said lower interest rates on bank deposits and stagnancy in property, as well as gold prices, have driven domestic investors towards equity mutual funds, in their search for higher returns.
Systematic Investment Plans (SIPs) have been the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk
Vidya Bala, Head, Mutual Fund Research, FundsIndia, said a further slash in fixed deposit (FD) rates by almost 50 basis points, compared with last year, has seen retail money come into equity markets through the MF route.
"Money from unwinding of deposits may also have entered mutual funds. Besides, with SIPs as a way of investing picking up among individual investors, equity funds have seen a steady increase in inflows as retail money, unlike institutional money, tends to be more sticky and steady," she added.
At present, the industry receives about Rs 5,000 crore per month through SIPs - an investment vehicle that allows investors to invest in small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly or quarterly.
Over the last few years, Sebi has been taking measures to increase MF penetration in smaller cities and getting newer investors into the fold.
Overall, the assets under management (AUM) of the MF industry, comprising 42 players, reached a staggering Rs 20.4 lakh crore in September-end from Rs 17.54 lakh crore at the end of March.