Mutual Fund assets go past Rs 50 trillion; SIP-tied AUM hits Rs 10 trn

The record AUM growth in 2023 was underpinned by a sharp rally in the equity market

The mutual fund (MF) industry added a record Rs 10 trillion to its total assets under management (AUM) in 2023, taking the cumulative tally past the Rs 50 trillion mark for the first time, in December. This 20 per cent growth in AUM last year was fuelled by a robust rally in the equity markets and a record Rs 1.62 trillion net inflows into active equity schemes. 

In another first, the AUM linked to systematic investment plans, too, hit Rs 10 trillion by the end of 2023.

The AUM of mutual funds — which took two years to climb from Rs 30 trillion to Rs 40 trillion — achieved the next Rs 10 trillion in a mere 13 months, according to data from the Association of Mutual Funds in India (Amfi).

“While the MF industry took almost 50 years to build the first Rs 10 trillion of AUM, the latest Rs 10 trillion — from Rs 40 trillion to Rs 50 trillion — was amassed in just over a year,” said Venkat Chalasani, chief executive at Amfi.

The sharp rally in the equity markets propped up the record AUM growth in 2023; while the Sensex and the Nifty50 ended the year with gains of 18.7 per cent and 20 per cent, respectively, the midcap and smallcap indices registered over double the gains.

 “In 2023, the top five equity inflow categories garnered close to 85 per cent of Rs 1.62 trillion inflows. The contributors were smallcap (25 per cent), sectoral/thematic (19 per cent), midcap (14 per cent), multicap (12 per cent), and large & midcap (12 per cent). Conversely, largecap and focused schemes faced net outflows of Rs 3,000 crore and Rs 2,700 crore, respectively,” said Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research.

Experts suggest that AUM growth could have been even higher if not for the upward revision of debt fund taxation in April. The industry had set a decade-end target to achieve an AUM of Rs 100 trillion in 2019. With the AUM growing at a 16 per cent CAGR in the past four years, a similar growth in the next five years should take the AUM past Rs 100 trillion.

Despite the rapid growth in the MF industry, its AUM is still a fraction of bank deposits, which stood at Rs 198 trillion as on December 15. Mutual funds also lag direct equity investing. The number of MF investors at 42 million is nearly half the figure for direct equity investors at 85 million.

 The industry has added 12 million new investors over the past two years. The number of accounts has grown by 17 per cent in these two years to touch 165 million in December. This implies that an MF investor has an average of four accounts.

“The MF industry is geared up for the next growth milestone of Rs 100 trillion AUM and 100 million investors, which we are sure will be achieved sooner than expected as the industry has shifted gears to accelerate distribution outreach by leveraging technology across the value chain,” said Navneet Munot, chairman of Amfi and MD & CEO of HDFC Asset Management.

 The AUM linked to SIPs too is surging fast -- at a compound annual growth rate (CAGR) of 39 per cent in the past six years. 

The SIP AUM has doubled in the past two and a half years amid consistent growth in monthly inflows.

 Net monthly SIP inflows, which stood at Rs 4,100 crore in January 2017, increased to Rs 17,600 crore in December 2023. Growth in SIP flows has been consistent since 2021.

 In terms of inflows, the December 2023 quarter was the best three-month period for active equity schemes since January-March 2022 with Rs 52,490 crore net inflows.

 In December, net inflows into equity schemes rose 9 per cent month-on-month to Rs 17,000 crore. Schemes in the sectoral category were the biggest gainers, buoyed by new launches. These schemes received a net of Rs 6,005 crore, of which Rs 4,260 crore was contributed by the four new fund offerings in this space. Smallcap funds were once again among the top grossers with inflows of Rs 3,850 crore.

 However, largecap schemes, equity-linked saving schemes (ELSS), and focused funds registered outflows.