Mutual Funds AUM Crosses Rs 50 Trillion

As the calendar year 2023 ended, the Assets Under Management (AUM) of the Indian Mutual Funds industry stood at Rs 50.78 trillion. The AUM figure has more than doubled in the last five years. The recent stock market rally has played its part in helping the industry achieve this magic figure.

Over the years, MF AUM crossed Rs 10 trillion for the first time in May 2014. By August 2017 the AUM crossed Rs 20 trillion for the first time. In November 2020, the Rs 30 trillion figure was first breached.

The Funds Are Alright

A mutual fund industry campaign titled, “Mutual Funds Sahi Hai” was launched in March 2017. Readers may recall the recent ads under this campaign featuring cricket icons Sachin Tendulkar and Mahendra Singh Dhoni. It is widely acknowledged that this campaign has immensely contributed to raising the profile of mutual funds among Indian investors.

The size of AUM in the year of the campaign launch had barely touched Rs 20 trillion. By the end of 2017, the industry AUM stood at Rs 21 trillion. The recent level of Rs 50 trillion indicates a 135% jump in six years. The mutual fund folios increased by 150% during this period. Since 2017, the benchmark S&P BSE Sensex has doubled from 34,000 to 70,000.

In a bid to create awareness about mutual funds among investors, this campaign has brought mutual funds and SIPs into common parlance.

A Push from The Bourses

It is observed that the folio size in the mutual fund industry has consistently increased since 2014 when it was at around 4 crores. Now it is within touching distance of 16 crores. Other than the sharp decline due to COVID-19, there have been no major setbacks faced by the market. The short slowdowns were addressed by the market by touching new highs. This pattern has encouraged investors to invest more and more in mutual funds.

The Sensex had just crossed 27,000 by the end of 2014 and went on to touch 40,000 in May 2019. By the start of 2021, it crossed 50,000 points. This indicates the consistent growth in the market.

Lower Costs and Risk Likelihood

The withdrawal of entry load in 2009 meant that mutual fund investors could start investing without bearing any joining fee. With AMC marketing and commission costs no longer cascading down to investors, more and more investors were encouraged to join in.

While riding the momentum of the market, AMCs maintained low levels of non-performing assets (NPAs). This was in contrast to the comparatively higher NPAs of insurance companies and banks. This increased the real return for the investors and lowered the investment risk. The presence of ELSS, an equity mutual fund type, among the tax-deductible investments, also encouraged people to invest in them.

The March of the Torchbearers

Retail participation in mutual funds received a significant boost due to the efforts and presence of mutual fund distributors. Although direct investments are increasing, distributors continue to hold a wider market base and are present across India. Even now, it has nearly six times more coverage compared to direct retail participation.

Continuing to Build Investor Trust

The consistent increase in retail participation is an indication of the increased trust that people have in the mutual fund industry. Assured by the strong regulations of SEBI, more and more people are encouraged to participate in mutual fund investments.



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