Equities are finding increasing acceptance among investors as the total assets under management jumped to Rs 36 lakh crore. With global equity markets booming since the last few years and low interest rates offered by banks, investors have been shifting to riskier assets to receive returns.
So far, 2020 and 2021 were great years for the markets with a large number of new retail investors entering the markets. In 2021 alone, the markets gave a 23 per cent return on the invested money. Institutional money found its place in the markets as well, though foreign institutions began withdrawing at the end of 2021.
As a result, several large players in the mutual find space, such as SBI Mutual Fund, Axis Mutual Fund, and UTI Mutual Fund led with around 36 to 43 per cent growth in assets under management (AUM). The rise in AUM in part can be attributed the rise in stock prices as well.
However, IDFC Mutual Fund and HDFC Mutual Fund saw just 3 and 15 per cent growth respectively. Investments through systematic investment plans (SIP) stood at Rs 10,000 crore as well. Just before the year ended, November witnessed inflows of more than Rs 11,000 crore, the largest inflow through the SIP route in the market’s history. In total, the investments through SIPs crossed the Rs 1 lakh crore mark in 2021. The share of SIPs in the total AUM has grown from 12.6 per cent to 14.6 per cent over the last two years. SBI Mutual Fund, ICICI Mutual Fund and HDFC Mutual Fund lead the industry in terms of assets under management.
The rapid growth of the industry has attracted several players that are vying for a mutual fund licence. Zerodha, NJ Invest and Samco are some of the traditional players looking to get into the asset management business. Some fin-tech companies are exploring opportunities to buy out existing asset management companies as well.
According to data provided by the Association of Mutual Funds in India, around 55 per cent of retail equity mutual fund holdings have stayed put for more than two years. Over the last two years, India has seen a major devaluation in equities as well, making the stickiness of funds a positive sign. Nevertheless, a report from the National Stock Exchange had previously highlighted that most retail investors only have a marginal interest in the stock markets.
“There were more than 13 million active (non-zero trades) investors in 2020, and over 19 million in 2021. The vast majority of these traders had only marginal interest in the market, both in terms of their activity, measured by turnover, and their investment. Illustratively, over 80 per cent of investors had net investment of less than Rs 50,000 over an entire year,” the report said.
Hence, with greater penetration, rising income, and a significant savings rates, we could see more investments made by retail investors in the future. Almost 70 per cent investors put in less than Rs 6,000 in the markets in 2021 indicating a large untapped market. There has been a shift towards direct investing as well – a trend that industry experts believe should reverse in a bear market. Overall, from an Indian retail investor perspective, mutual funds, both active and passive, do have along way to go.