Net inflows into equity-oriented schemes rose 95% to ₹4.3 lakh crore in September 2024 from ₹2.21 lakh crore a year ago, while inflows through systematic investment plans (SIP) rose 41% to ₹2.43 lakh crore, compared to ₹1.72 lakh crore in the same period.
With a buoyant stock market, many fund houses took the opportunity to launch new products which recorded inflows of Rs 1.11 lakh crore, an increase of 57% compared to Rs 70.56 billion a year earlier.
“Increased awareness about mutual funds has led to greater acceptance for investing in these products. This trend is increasing and mutual funds have become the primary vehicle for many investors to generate wealth,” said A Balasubramanian, CEO of Aditya Birla Sun Life Mutual Fund.
A Nomura report said that the Indian mutual fund industry remains significantly underpenetrated, with an industrial assets under management (AUM) to GDP ratio of 18% versus the global average of 65%. There are 50 million unique investors versus 750 million PAN cardholders, which translates to a penetration of 3.3%, providing a large market to address.
“Various measures taken by the regulator, including categorization and rationalization of mutual fund schemes, have simplified products for investors. Transparency, flexibility, liquidity and the ability to initiate investments with low amounts have attracted investors towards mutual funds,” said Dheeraj Gaur, CEO of Arete Capital Services. Distributors point out that mutual fund portfolios are made available every month and the net asset value (NAV) is declared daily, which helps increase investor confidence. The low note size of ₹500, flexibility to start and stop SIPs and hybrid products that have capital tax have attracted investors.Variable income mutual funds It also scores on tax efficiency with a long-term capital gains tax of 12.5% payable after holding for one year, compared to 30% on fixed income products like fixed deposits for wealthy investors.
However, some dealers also point out that many retail investors have flocked to mutual funds in the last 3-4 years looking for past returns and have not seen a drawdown so far.
“High returns without withdrawals have led to increased allocation by investors towards equity mutual funds. Several investors now prefer these products over traditional deposits,” said Anup Bhaiya, CEO, Money Honey Financial Services.
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