India’s mutual fund industry has seen some impressive growth over the past decade and key mutual fund trends have changed over the years. Back in June 2013, the total AUM (Assets Under Management) was around ₹8.11 trillion. Fast forward to June 2023, and it’s skyrocketed to ₹44.39 trillion! That’s a whopping five-fold increase in just ten years.
I mean, it’s not just about reaching milestones; it’s about smashing them. Back in May 2014, the industry celebrated crossing the ₹10 trillion mark for the first time. And then, just last year in November 2020, they hit another massive milestone by surpassing ₹30 trillion. It’s pretty remarkable to see how the mutual fund sector in India has grown and evolved over the years.
In the ever-evolving landscape of mutual funds, September 2023 has brought forth an array of intriguing trends and patterns. As we delve into the Association of Mutual Funds of India’s (AMFI) latest report, we uncover the key mutual fund trends that shaped the mutual fund industry during September 2023. From surging SIP flows to the rise of hybrid funds, these trends provide valuable insights for both investors and fund managers.
1. AUM Scaling New Heights
The Average Assets Under Management (AUM) reached an all-time high of Rs 47.79 trillion in September 2023, reflecting robust growth. Despite the weakening rupee affecting dollar AUM growth, the mutual fund AUM surged by 19.83% YoY compared to September 2022, driven by inflows and a bullish Nifty.
This remarkable milestone marks a significant stride in the Indian mutual fund industry, demonstrating its resilience and capacity to attract investments, even amid global economic uncertainties.
2. Shifting AUM Mix: Active Equity Dominance
Over the last few years, there has been a notable shift in AUM mix from active debt to active equity funds. In September 2023, this trend reached new heights due to heavy selling in debt funds, further underscoring the dominance of equity funds.
The share of active debt funds in AUM decreased from 19.9% to 18.8% YoY, reflecting the growing confidence of investors in equity-oriented schemes. Equity-oriented funds’ market share has increased from 51.2% to 54.1% YoY, marking a significant shift that fund managers should take note of.
3. Rise of Hybrid Funds
Hybrid funds gained prominence in September 2023, contributing substantially to New Fund Offering (NFO) flows. The surge in interest in multi-asset allocation funds within the hybrid category was particularly noteworthy.
Investors’ growing appetite for hybrid funds highlights the need for diversification and risk management in their portfolios. This trend presents opportunities for fund houses to craft innovative hybrid offerings to meet investors’ evolving needs.
4. Retail Investors Take Center Stage
The influx of Gen-Z and millennial investors into mutual funds, coupled with the popularity of Systematic Investment Plans (SIPs), has catalyzed a surge in the number of retail folios as well as the retail AUM in this period.
In September 2023, gross SIP flows soared to a record Rs 16,042 crore, highlighting the increasing participation of retail investors in wealth creation through mutual funds. The share of individuals in mutual fund AUM composition increased from 57.1% to 58.8%, with a significant MOM rise.
5. Individual Investor Allocation Basket
Individual investors allocated 82% of their mutual fund assets to equity schemes, reflecting a strong preference for wealth creation through equity investments. This shift toward equities signifies a growing awareness among retail investors regarding the potential for long-term capital appreciation.
Institutional investors and corporates, on the other hand, showed a higher allocation to liquid funds and passive funds. The diversification of investor portfolios presents opportunities for fund managers to tailor products that cater to these diverse preferences.
6. Geometric Growth in Folios
The number of mutual fund folios has witnessed remarkable growth since 2014, expanding by 298%. This impressive rise in investor accounts underscores the increasing acceptance of mutual funds as an investment vehicle.
Retail investors displayed patience, with 51.4% of equity fund assets held for more than 2 years. This shift in mindset toward long-term investing aligns with the principles of wealth creation through systematic and disciplined investments.
7. Thriving in Tier-2 and Tier-3 Cities
Tier-2 and Tier-3 cities are emerging as significant contributors to mutual fund sales. The greater digital connectivity and a growing appetite for systematically managed investments are driving this trend.
As mutual fund marketers and brokers witness the surge in interest from semi-urban investors, they are exploring ways to make mutual funds more accessible and appealing to this demographic. Innovative distribution channels and investor education initiatives can further accelerate this growth.
8. Direct Route Adoption
While SEBI introduced Direct schemes in 2013, only 21% of retail investors’ funds were directed through this route. Corporates and institutions appear to be the primary beneficiaries of the direct route.
To encourage greater retail participation in direct plans, investor awareness and education programs can be instrumental. Retail investors can benefit from reduced expenses and more control over their investments through the direct route.
Conclusion:
The mutual fund industry continues to evolve, with September 2023 showcasing exciting developments. As retail investors embrace mutual funds, equity funds’ dominance persists, and hybrid funds gain traction, the financialization of household savings is on the rise. These trends underscore the growing importance of mutual funds in the Indian investment landscape, offering investors diverse opportunities and avenues for wealth creation.
In the last 2 months, individual investors have gained ground and equity as an asset class has also gained ground. The cult of mutual fund
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Investing through various economic and market cycles
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.
