Equity funds: Retail investors stay put despite market volatility

Over 56% retail investors holding on to equity funds for at least 2 yrs as of March'22

Investors have remained invested in equity funds despite volatility in the Indian markets and lower returns from several equity fund categories. As of the March quarter, over 56.33 per cent of retail investors stayed invested in equity funds for more than two years, against 55.27 per cent in March 2021.

Over the past two years, the trend of investors holding their equity funds for more than two years has strengthened, shows data from the Association of Mutual Funds in India (Amfi). As of the March quarter of 2020, the share of those holding their equity funds over 24 months was 48.72 per cent; since then, the figure has risen to over 56 per cent.

The data shows that of total retail equity assets worth Rs 8.59 trillion, Rs 4.83 trillion accounted for those who fall in the abovementioned category. Even as retail investors have continued to remain invested for a longer term, the holding period of high net-worth individuals (HNIs) has been lower year-on-year as only 43.62 per cent fall in the two year-plus group as of March 31, 2022. The figure was 47.11 per cent in March 2021 and 39.36 per cent in March 2020.

G Pradeepkumar, chief executive officer, Union Asset Management Company, says: “In the last few years, we have seen a lot of maturity from retail investors as they are entering equity funds with a long-term view. In fact, investors are now investing more into equity funds whenever there is a sharp correction in the markets.”

Even though there has been a sharp correction in the markets and returns from equity funds have fallen, investors have stayed put in these schemes as large numbers of retail investors continue to invest through systematic investment plans (SIPs).

In the past year, an average large-cap equity fund has given 5.44 per cent returns, while mid-cap and small-cap funds have returned 6.69 per cent and 8.28 per cent, respectively.

On the other hand, SIPs flows have remained strong in the last few months. In April, the SIP contribution was Rs 11,863 crore. In the last financial year, SIP inflows were to the tune of Rs 1.24 trillion. 

Vaibhav Porwal, co-founder, dezerv, says: “The investor awareness programme undertaken by Amfi has played a remarkable role in making investors understand the benefits of long-term investing. Alternatively, if we look at equity MFs, they have generated returns in the range of 14 per cent to 18 per cent over a 10-year period and it has been one of the best asset classes for retail investors, among other financial assets.”

In April, new SIP registrations stood around 2.18 million, while in the last financial year, 26.63 million new SIP registrations took place in the MF industry.

"A lot of investments are coming in on account of SIPs, which itself is a long-term saving pool. I would expect the age of investments to increase over a period of time,” adds Pradeepkumar.