Many more Indians flock to MFs

Flow surge in equity schemes is an important reason why Indian stock market did not crash

The past three years have been phenomenal for the mutual fund (MF) sector. The equity segment, in particular, has seen almost unprecedented growth. Assets under management are now more than the Rs 5 lakh crore-mark; since the start of 2014, a little over 10 million accounts have been added in the equity category. After slipping to 29 million after the Lehman crisis, the investor base has steadily been rising over the past three years to 39.6 mn as of end-January 2017. 

Since May 2014, when the Narendra Modi government took charge, monthly net inflow in equity schemes have never turned negative, except on one occasion, in March 2016. That was mainly due to unexpectedly higher redemption by investors, though gross sales remained healthy, meaning fresh money continued to come in. Total net inflow (net of outflow) during this period has been a whopping Rs 2 lakh crore — over Rs 5,000 crore in average monthly inflow. 

Noteworthy is the burgeoning size of Systematic Investment Plans (SIPs). Last month, flow through SIPs crossed Rs 4,000 crore, huge on an annual basis.

Experts say the flow surge in equity schemes is an important reason why the Indian stock market did not crash as much as was anticipated with the strong outflow of foreign money in 2016. Individual investors are becoming more and more aware about MF investments. With continuous investor awareness programmes and usage of digital methods aiding investment, the results have been positive. With the poor penetration of MF products, sector officials see huge potential — hardly 15 million individual investors in MFs, in a country with 1,300 million people.

Sources: Association of Mutual Funds in India & Securities and Exchange Board of India