Indian mutual fund industry has witnessed over five-fold growth in Assets under Management (AUM) in the last ten years
FinTech BizNews Service
Mumbai, July 19, 2024: Indian mutual fund industry, which has witnessed over five-fold growth in Assets under Management (AUM) in the last ten years, is well on track to surpass the Rs 100 lakh crore ( Rs100 Trillion- Tn) AUM mark in the next two-to-three years. The industry’s AUM, which had crossed the Rs 50 lakh crore mark for the first time in December 2023, has surpassed Rs 60 lakh crore in a span of just six months and stood at Rs 61.16 lakh crore in June 2024.
The net AUM increased by nearly 38 per cent (37.77 per cent) to touch Rs 61.16 lakh crore in June 2024, up from Rs 44.39 lakh crore in June 2023. On a month-on-month basis, the net AUM increased by nearly 4 per cent (3.81 per cent) from Rs 58.91 lakh crore in May 2024. Interestingly, the industry’s AUM has grown by 527 per cent over the past decade from Rs. 9.75 lakh crore in June 2014 to Rs. 61.16 lakh crore in June 2024.
According to Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, the resilience of the Indian financial market and improved growth prospects of the Indian economy is boosting investor confidence leading to increased participation of retail investors. This is auguring well for the mutual fund industry, which has been witnessing a robust growth in inflows and a surge in contribution through the SIP route.
“India is in a bright spot in the global economy. Reformatory measures adopted by the Indian government and strong macroeconomic fundamentals bores well for the Indian economy and the Indian mutual fund industry. Market regulator SEBI has adopted a slew of measures which has improved the transparency and accountability of the mutual fund industry. This, in turn, has helped boost investor confidence leading to increased participation,” Kumar said.
The sum total SIP contributions for the first half of 2024 surpassed Rs. 1 lakh crore level and stood at Rs. 1.20 lakh crore. Monthly SIP contribution continued to remain above Rs 20,000 crore for the third consecutive month as it rose to a new high of Rs. 21,262 crore in June 2024. SIP contributions increased by nearly 44 per cent on a year-on-year basis.
“The advantage of rupee cost averaging and the ability to invest in a disciplined manner without worrying about market volatility are some of the key reasons for the growing popularity of SIPs as an investment vehicle,” Kumar pointed out.
“Mutual funds has been able to gain trust as an effective and efficient wealth appreciation and preservation tool. This coupled with the improving distribution network, digital innovation and investor education initiatives has helped attract inflows into the industry,” he added.
Equity mutual funds witnessed a whopping 370 per cent rise in inflows at Rs 40,608.19 crore in June 2024, as against Rs 8637.49 crore in June 2023. Nearly 55 per cent of the inflows came from sectoral/thematic funds, which saw inflows to the tune of Rs 22,352 crore in June 2024. This is a sharp surge as compared to inflows of around Rs 459 crore in June 2023.
Sectoral/thematic funds come with a bias as they are inclined towards a theme or sector. In case the concerned sector/theme experiences some headwinds, then the entire fund may start to underperform as they have high exposure to a particular sector. This is in stark contrast to a diversified fund as it has exposure to multiple sectors and is well insulated from such sectoral shocks even though not completely immune to it.
“So before investing in sectoral/thematic funds, an investor should have a good understanding of the sector. It is also important to monitor the sector on a continuous basis and rebalance their portfolios regularly based on market developments,” Kumar said.
