Market correction, volatility slow mutual funds investor additions

Industry adds 0.3 million new investors in April, lowest in 22 months

New investor additions by mutual funds (MFs) have slowed dramatically in recent months, indicating that market correction and a rise in volatility are somewhat dimming the appeal of equity schemes.

 

MFs have onboarded 300,000 new investors in April 2025, the lowest in 22 months.

 

During the previous 12 months, the investor count grew by around 960,000 every month, on an average.

 

The total number of unique investors is mapped by the total permanent account number (PAN) registrations. At the end of April 2025, the industry had 54.6 million unique investors.

 

According to MF officials, the decline in new investor additions in recent months is largely due to the volatility in the equity market.

 

“The pace of new investor additions is influenced by the trajectory in the equity market. As and when the market stabilises, the flow of new investors will pick up again,” said B Gopkumar, managing director (MD) and chief executive officer (CEO) of Axis AMC. 

 

Correction in the equity market during the second half of financial year 2024-25 impacted equity MFs' showing in the past returns' charts, especially the one-year performance.

 

The trend in MFs is like the one seen in the direct equity space. Demat account additions had slowed to a 23-month low of 2 million in April.

 

New fund offerings (NFOs), which are also a key driver of new investor additions, also declined in recent months. In April, only one active equity scheme completed the NFO period, collecting just ₹171 crore. Launches across categories totalled seven and they collected ₹350 crore.

 

In comparison, the second half of FY25 witnessed 25 launches and ₹6,000 crore collection on an average each month. 

 

The correction in the equity market, which started in the last week of September 2024, continued over the next six months with the benchmark indices ending in the red for five consecutive months from October 2024 to February 2025. 

 

Since March, the market is in the green on a monthly basis but the volatility has continued.

 

While the downturn resulted in a decline in equity MF flows and new investor additions, participation from existing retail investors has remained strong. Systematic investment plan (SIP) inflows rose to a new high of ₹26,632 crore in April after seeing marginal declines in the previous months. The assets under management (AUM) linked to SIP accounts also rose to a new high of ₹13.9 trillion in April.

 

"The drop in new mutual fund investor additions comes despite record SIP flows last month, indicating that while existing investors are staying the course, new entrants are turning cautious," said  Amit Jain, co-founder of Ashika Global Family Office Services. 

 

"This slowdown is more a recalibration than a reversal, but it does highlight the need for stronger investor handholding and realistic return expectations," he added.

 

Abhishek Dev, Co-founder and CEO, Epsilon Money, said that while investor additions have come down in recent months, the long-term picture remains positive, given the low penetration.

 

"There is growing interest in financialisation of savings. SIP numbers have continued to witness record contributions despite decent volatility recently. Therefore, while new investor additions have come a tad lower, the overall growth remains full of optimism. Breadth of the Indian equity markets continues to deepen," he said.