MFs close in gap with bank deposit on back of strong growth, new investor addition

Thanks to uninterrupted bull run and renewed interest in equity investment, the quantum of assets under management of the mutual fund industry accounts for 26 per cent of the bank deposit as of March-end against 21 per cent logged in FY23.

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While bank deposits have increased 13 per cent last fiscal to ₹205 lakh crore, the mutual fund industry has registered 35 per cent growth in AUM to ₹53.40 lakh crore on the back of sharp increase in inflow and addition of new investors.

The equity AUM alone has jumped 48 per cent to ₹39 lakh crore (₹26.60 lakh crore) even as the inflows dipped 22 per cent to ₹2.37 lakh crore (₹3.02 lakh crore).

The number of unique investors (identified by PAN number) added by the MF industry has increased by 69 lakh or 18 per cent to 4.46 crore in FY24.

Of the overall AUM of the MF industry, individual investors account for 61 per cent against 58 per cent in FY23 while institutional investors share was down at 39 per cent against 42 per cent, according to Franklin Templeton study.

With the sharp run in equity markets, the industry has managed to reach beyond top-30 cities to attract new investors especially through the monthly systematic investment plan.

The Systematic Investment Plan inflows were up 28 per cent at ₹2 lakh crore (₹1.56 lakh crore) with 98 per cent increase in new SIP account to 42.87 lakh (21.65 lakh) in FY24.

Palka Arora Chopra, Director, Master Capital said one of the drivers behind new investor additions is the adoption of SIP which allows investors to contribute a fixed amount at regular intervals, rather than pumping in a lump-sum in one go.

Use of online mode to reach out to the young investors and Gen Z in rural areas to tap the equity market through small SIPs of as low as ₹500 per month has made MF investments more inclusive and appealing to a broader segment of the population, especially first-time investors, said Chopra.

While market conditions may impact investor sentiment, low penetration amid the inherent strengths of SIPs, such as discipline, convenience and long-term wealth-building potential are likely to sustain the momentum of new investor additions in the years to come, she said.

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Riding on the bull run, the investment attracted by the industry through new fund offer increased nine per cent last fiscal to ₹68,038 crore against ₹62,342 crore in FY23. Interestingly, equity remained the core theme of NFOs. Of the overall NFO flows, 89 per cent or ₹60,336 crore of the schemes were on equity.