Asset management companies added 51 lakh investor accounts in June quarter, taking the total tally to 13.46 crore, on increasing awareness about mutual funds and ease of transactions through digitisation, and experts hope the ongoing financial year to be promising too.
In comparison, 93 lakh accounts (or folios in mutual fund parlance) were opened in March quarter, while a staggering 3.2 crore investor accounts were added in the last 12 months, data with the Association of Mutual Funds in India (Amfi) showed. Although there were fewer folios in April-June this year than in the March quarter, there was still an increase, which is an indication that investors continued to invest despite the volatility in the market.
Geopolitical tensions like the Russia-Ukraine War, increasing inflation, rising bond yields, and the Federal Reserve’s hawkish views on interest rates are a few factors that can be attributed to this, said Priya Agrawal, Money Coach at LXME. Going forward, the ongoing financial year appears to be promising in terms of folios growth, she said.
Market conditions, geopolitical situations, inflation rates, financialisation of investments and increasing awareness among the people are some of the elements that may have an impact on this industry, she added.
“Majority of mutual fund retail investors invest in equity funds. The market conditions will have a role to play in increasing the number of folios and investors. The participation will increase when more stability returns in the stock market, which may happen in the coming few quarters. Hence, we believe the reach and penetration of mutual funds will increase this financial year,” Harshad Chetanwala, Co-founder of MyWealthGrowth.com, said.
According to the data, the number of folios with 43 fund houses rose to 13.46 crore in June 2022 from 12.95 crore in March 2022, registering a gain of 51 lakh during the three-month period. The industry crossed a milestone of 10 crore folios in May 2021. The number of folios under equity, hybrid and solution oriented schemes, wherein the maximum investment is from retail segment, stood at about 10.72 crore as of June quarter 2022, rising nearly 4 per cent from the preceding January-March period.
Folios are numbers designated to inpidual investor accounts. An investor can have multiple folios. “The retail participation should continue to increase in future as mutual fund penetration is still low when compared to its actual potential. As we will see more awareness about mutual funds we will see retail participation increasing,” Chetanwala said.
The mutual fund space has been witnessing a consistent growth in folio numbers in the past few years. It saw an addition of 3.17 crore investor accounts in 2021-22, 81 lakh in 2020-21, 73 lakh investor accounts in 2019-20, 1.13 crore in 2018-19, 1.6 crore in 2017-18, over 67 lakh in 2016-17 and 59 lakh in 2015-16.
Some tailwinds that are supporting the industry include increasing mutual fund (MF) awareness, strong distribution platforms and ease of transactions through digitisation, which was further driven by the COVID-19 pandemic.
According to LXME’s Agrawal, multiple factors that have enabled the growth in the mutual fund sector are an increase in digitisation, availability of easy-to-consume information, increased awareness, and a mindset shift from traditional instruments to the newer ones especially equity-based funds as the investors are becoming more conscious of how important it is to have instruments in their portfolios that can combat inflation.
Despite the robust growth in folio count over the past few years, MF penetration remains low, with less than 3 per cent of India’s population having MF exposure. Of the 51 lakh addition, 35 lakh folios were added in equity-oriented schemes. Investors’ accounts in equity-oriented schemes (open and close ended) rose to 8.98 crore in June quarter from 8.63 crore in March quarter.
Investors are preferring equity as it is known to be a value creator asset class and its increasing awareness amongst the investors is driving the growth in investments in equity-oriented schemes with an aim to achieve long-term financial goals.
However, debt-oriented schemes’ (open and close ended) folios count dropped by 2.43 lakh to 73.65 lakh during the period under review. Within the debt category, liquid funds continued to top the chart in terms of number of folios at 17.5 lakh, followed by low duration funds (10.14 lakh), corporate bond funds (6.38 lakh), ultra short duration funds (6.15 lakh) and overnight funds (6.11 lakh).