Investor Participation in Mutual Funds: Over the past ten years, individual investors have significantly increased their share of mutual funds’ assets under management (AUM), increasing eight-fold between FY14 and FY24. As of mid-2024, individuals held 63% of the total AUM, up from 45% in FY10. Total AUM in the mutual fund sector reached Rs 64.7 trillion by 2024, reflecting a compound annual growth rate (CAGR) of 21% over the past five years. This growth is attributed to better financial literacy, easier access to investment platforms and attractive long-term returns offered by mutual funds, experts say.
The impact of financial education and SIPs
The rise in individual investor participation is due to better financial literacy and a shift from physical to financial assets. Systematic Investment Plans (SIPs) have played a crucial role, with inflows touching a record high of Rs 23,332 crore by July 2024. The number of SIP accounts also touched an all-time high of 9.34 crore, boosting investor confidence and financial understanding. “Investors are moving away from traditional investment options such as fixed deposits and real estate and have a growing preference for mutual funds,” said Siddharth Maurya, Founder and Managing Director, Vibhavangal Anukulakara. “The share of equity in AUM of mutual funds has increased from 5.3 per cent in FY14 to 14.7 per cent in FY24, highlighting increased confidence in equity markets and professional fund management,” Maurya added.
Growth beyond the big cities
The expansion of the mutual fund industry is now reaching beyond metros. From March 2019 to March 2024, Mumbai and Delhi’s share of assets under management fell from 47 per cent to 39 per cent. In contrast, smaller cities have seen their share rise from 25 per cent to 35 per cent, indicating a broadening of the investor base.
AMC market dominance
The number of asset management firms (AMFs) has grown from 30 in fiscal 2006 to 45 by July 2024. Large AMFs, with more than 5 percent of the market share, have strengthened their position, holding 72 percent of the market by 2024, up from 67 percent in 2006. Mid-sized AMFs have seen their share fall to 25 percent, while small AMFs now account for only 1 to 3 percent of the market.
Rise in passive investments
The report also highlights a notable rise in passive investments, with passive AUM reaching Rs 10.9 lakh crore by July 2024, a 40 per cent increase over the previous year.
The share of passive AUM in total AUM has more than doubled from 7 percent in May 2020 to 17 percent in July 2024, reflecting a growing preference for efficient, low-cost market exposure.
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