Increasing awareness about mutual funds, ease of transactions through digitization, and a sharp surge in equity markets have aided asset management companies to add a staggering 3.17 crore investor accounts in 2021-22, with experts saying the trend is likely to continue this fiscal as well.
This was a significant rise from 2020 to 2021 when 81 lakh accounts (or folios in mutual fund parlance) were opened, data with the Association of Mutual Funds in India (Amfi) showed.
The ongoing financial year too appears to be promising in terms of folios as an increase in investor accounts will enable people to move beyond fixed deposits and savings accounts, said Priti Rathi Gupta, founder of LXME, a financial platform for women.
Market conditions, geopolitical situations, inflation rates, financialization of investments, and increasing awareness among the people are some of the elements that may have an impact on this industry, she added.
If the retail investors get spooked by the market turbulence driven by the change in interest rates, then folios are expected to decline, said Swapnil Bhaskar, Head of Strategy, Niyo -- a millennial-focused neo-banking fintech.
According to the data, the number of folios with 43 fund houses rose to 12.95 crore in March 2022 from 9.78 crores in March 2021, registering a gain of 3.17 crore during the one-year 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 the retail segment, stood at about 10.34 crore as of March 2022.
Folios are numbers designated for individual investor accounts. An investor can have multiple folios.
The mutual fund space has been witnessing consistent growth in folio numbers in the past few years.
It saw an addition of 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 digitization, which was further driven by the Covid-19 pandemic.
According to LXME's Gupta, multiple factors have enabled the growth in MF folios, like an increase in digitisation, availability of easy-to-consume information, increased awareness, and a mindset shift from traditional instruments to mutual funds as the investors are expecting good returns based on past market outperformance despite the ongoing pandemic.
"Amfi's ongoing 'Mutual Fund Sahi hai' campaign and other investor awareness initiatives undertaken by Asset Management Companies (AMCs) have been instrumental in connecting the industry with wider masses to emphasize on the importance of investing in MFs," said Saugata Chatterjee, Chief Business Officer, Nippon India Mutual Fund.
Also, with AMCs deepening their branch network, and an increase in distribution touchpoints across the length and breadth of the country, the industry has been able to bring in new investors, he noted.
Jimmy Patel, MD and CEO, Quantum AMC, said as interest rates have been moderating, investors are looking at options beyond traditional avenues. Further, increased awareness about mutual funds has helped in boosting participation by retail investors.
He further said volatility in the market and chaos across the globe have not prevented Indian investors from pouring funds into the market through the mutual fund route. This shows the investors' trust and confidence in the Indian growth story.
Of the 3.16 crore addition, 1.95 crore folios were added in equity-oriented schemes. Investors' accounts in equity-oriented schemes (open and close-ended) rose to 8.63 crore in March 2022 from 6.68 crore in March 2021.
While returns from other asset classes have not been that impressive, equity, with its noteworthy performance, turned out to be the obvious choice for investors, said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
Since mutual funds are the most convenient and the best way to invest in equities, more and more investors are investing in it, he pointed out.
Given a low-interest rate environment, equity markets have seen strong participation from retail investors who were looking for higher returns. As a result, the mutual fund industry has seen a surge in equity folio count, Nippon India Mutual Fund's Chatterjee said.
Additionally, many MF investors are diversifying their portfolios to get exposure to other index and international funds, which in turn is also supporting the folio count growth, he added.
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.
Besides, debt-oriented schemes' (open and close-ended) folios count rose by 12.31 lakh to 88.4 lakh during the period under review.
Within the debt category, liquid funds continued to top the chart in terms of the number of folios at 22.29 lakh, followed by low duration funds (12.26 lakh), ultra-short duration funds (7.99 lakh), corporate bonds (7.13 lakh), and short duration funds (6.98 lakh).
In terms of top asset management companies, Nippon India MF has seen the maximum growth in investor folios in FY22. Its investor folios rose by 70.22 lakh to 1.7 crore as of March 2022.
This was followed by Axis MF, which saw an addition of 47.81 lakh investor accounts to 1.28 crore, while folios of ICICI Prudential MF grew by 33.29 lakh to 1.47 crore.
The average assets under management of the industry sharply rose to Rs 37.7 lakh crore as on March 31, 2022 from Rs 32.17 lakh crore in March 2021.