Individual investor share in mutual funds at record high, shows data

Retail investors and high networth individuals (HNIs) together accounted for a more than 60 per cent share in the mutual fund (MF) industry’s assets in 2022-23 – the highest since records began in 2009-10. Companies, banks, and other institutions accounted for the rest of the assets.

The total MF assets of retail investors across schemes touched Rs 10.07 trillion as of March 2023, data compiled by the Centre for Monitoring Indian Economy (CMIE) shows. If the investments made by HNIs are factored in, then individual investors’ assets touched Rs 23.7 trillion. Of this, equity mutual funds, the top investment choice, accounted for Rs 13.8 trillion in FY23. Hybrid funds, which invest across asset classes, were a distant second with assets worth Rs 4.2 trillion.

Nearly Rs 6 out of every Rs 10 in individual MF investments are in equity schemes. The exposure would actually be higher if the equity holdings of hybrid schemes, exchange-traded funds, and index funds are included.

Yet, MFs are not the financial savings instrument of choice. Altogether they account for less than a quarter of the money that goes into bank deposits. This suggests far more upside for such funds in the coming years.

The stock market recently hit record highs, prompting an increase in retail activity. It has been mostly steady since the Covid-19 pandemic, barring brief scares. Data from the Association of Mutual Funds in India shows that the majority of equity investments are less than two years old. The reaction of new investors to any significant or prolonged slide in the markets may determine if MFs will continue their growth.