MF assets may have hit Rs 50 trillion milestone amid market rally

AUM, which took 24 mths to go from Rs 30 trn to Rs 40 trn, will add next Rs 10 trn in 12 mths

The mutual fund industry’s assets under management (AUM) have likely breached the Rs 50 trillion mark following a rally in domestic equities this month. The industry’s average AUM stood at almost Rs 48 trillion at the end of October.
 

In November, the Nifty50 index has gained about 4 per cent so far, while smallcap and midcap indices have rallied close to 8 per cent. While the official figures will be released next month, experts say the AUM this month will hit the Rs 50 trillion milestone if the November inflows remain in line with the collection reported last month. In October, the industry garnered net inflows of Rs 80,500 crore.
 

“While Rs 50 trillion is a major landmark for the industry, the more heartening feature is the rising retail participation in a disciplined manner through the systematic investment planning (SIP) route,” said Navneet Munot, chairman of Association of Mutual Funds in India (Amfi), and managing director and CEO of HDFC Asset Management. “However, the penetration still remains low and the industry has a long way to go. The pace of growth will pick up further as we are still at an early stage of financialisation of savings,” he added.
 

The AUM, which took 24 months to go from Rs 30 trillion to Rs 40 trillion, will add the next Rs 10 trillion in half the time, if it touches Rs 50 trillion this month.
 

The industry has been scaling up at a faster pace in recent years, especially after the Covid-19 pandemic, underpinned by an upward trending equity market and growing popularity of SIPs. The monthly gross SIP inflows, which came in around Rs 8,000 crore in FY20, have now scaled up to Rs 16,900 crore. The inflows through SIPs alone have crossed Rs 1 trillion in the first seven months of FY24.
 

Industry players feel the Rs 50-trillion milestone could have been achieved a bit earlier if not for the change in taxation on debt MF schemes in April 2023. The hit on flows is evident from a slump in offtake of passive debt funds.
 

These schemes have recorded Rs 13,200 crore outflows during the April-October 2023 period compared to Rs 76,080 crore inflows in FY23.
 

The MF industry is aiming to hit the Rs 100 trillion in AUM target before the turn of this decade. In 2019, Amfi had released a report listing out an action plan to fast-track the industry’s growth and take the AUM beyond the Rs 100-trillion mark.
 

The measures recommended in the report included expanding distribution reach to bring in investors from beyond the major cities, simplification of products, and to increase share in household savings.
 

In FY23, MFs raked in a record Rs 1.8 trillion from households but their share in the overall savings remained at 6.1 per cent. Bank deposits, small savings schemes, and insurance products received a much higher share of household money. Industry players said as MFs gain in popularity, their share in the household savings pie will grow further.