Mutual funds to see fast growth

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Mutual Funds
POSITIVE TREND: Investors from smaller towns are investing in mutual funds with a long-term approach, unlike their counterparts in metros.

Hyderabad: Slump in the real estate market, gold prices and fall in fixed deposit interest rates have led to surge in mutual funds investment. People are looking for avenues to get better return for their investments. Mutual funds industry has seen a 40 per cent growth in assets under management (AUM). The number of folios has grown by over 93 lakh to an all-time high of 5.82 crore at the end of June 2017, from the year-ago level, driven by retail investors.

According to Securities and Exchange Board of India (Sebi) data, the number of folios rose to 5,82,30,384 at the end of June, from 4,89,24,391 in June-end 2016, a gain of 93.06 lakh. The number of investor accounts stood at 5.54 crore at the end of March quarter. Folios are numbers designated to individual investor accounts, though one investor can have multiple accounts.

Mutual funds have seen an infusion of Rs 93,400 crore, while equity and equity-linked savings schemes alone attracted more than Rs28,000 crore.

Systematic Investment Plans (SIPs) have emerged as the single most preferred mutual fund investment in India. SIPs nationally saw 37 per cent growth.

Mutual fund houses are looking at a combination of advisory offerings blending the benefits of human and robo advisory services guiding customers in asset allocation. Equity investments account for about 5 per cent of the total financial savings in India, of which 3 per cent has been into mutual funds.

Mutual fund folios have seen healthy growth in 2016 matching the growth that was witnessed during 2009. For almost seven years, the mutual funds sector remained flat during 2009-16.

The kickstart happened in 2014 when PM Narendra Modi came to power bringing positive sentiment and the other asset classes failed to attract investor money. First real estate prices fell, then gold and finally fixed deposit interest rates shrunk forcing investors to look for reasonable alternatives that could give better earnings. A significant portion of money that would have otherwise got invested in fixed deposits has got diverted into mutual funds, says, Vidya Bala, Head of MF Research at Fundsindia.com.

With gradual improvement in the awareness over mutual funds, retail investors are coming forward to make investments seeking long-term opportunities. When market sentiment is positive, AUM goes up and viceversa.

During October 2016 and February 2017, when the foreign institutional investors were exiting from Indian equities market, India still has stability and internal money was adequate enough. Retail money was in circulation. In the next 5-6 years, mutual funds and market linked products will drive the growth in financial savings space. As 48 per cent savings still go into fixed deposits, a bigger pie is awaiting for mutual funds to grab.

Small towns

Interestingly, people outside the top 15 cities in the country have started investing significantly into mutual funds, more so in SIPs. Also, Telugu States are seeing more growth than Mumbai and Delhi. While Hyderabad is seeing good traction, places such as Warangal are also picking up. People in bigger cities tend to take out money faster than the smaller towns from their investments, as the latter are showing more patience for long-term returns.

Fundsindia.com founder and COO Srikanth Meenakshi, says, “Through internet and availability of online platforms, smaller towns have got access to new avenues of investments. New customers are in the age group of 28 to 35 and about one-third of them are from technology industry while the other key occupations being services, manufacturing and public sector employed.”

Small towns contributed about Rs 3.5 lakh crore to mutual funds asset base by June-end, up by 46 per cent compared to June last year. Mutual funds’ assets under management (AUM) from B15 locations – small towns beyond top 15 (T15) cities – grew from Rs 2.4 lakh crore to Rs 3.5 lakh crore, as per Association of Mutual Funds in India (Amfi). Sebi has allowed more incentives for distribution of funds in B15 (beyond top 15 cities). Currently, B15 accounts for 18 per cent of the total assets of the industry.