Despite Volatile Markets, MF AUMs Increased by over 38% on The Back of SIPs

Even as the markets floundered through the year based on global cues and domestic sentiments, mutual funds thrived. The industry saw its Assets under Management rise by over 11% during the last financial year ended March 2019, according to the India Wealth Report 2019 released by Karvy.

Mutual funds emerged as the preferred investment option in financial assets for High Networth Investors and Ultra-high Networth Investors despite the volatility in equity markets which was assumed to be spooking investors. Even as the stock prices rose and fell sharply with news of IL&FS and other crisis pouring in, mutual fund investments continue to rise steadily on the back of heavy SIP investments.

The SIP culture in India is gaining ground as people look to invest their disposable income in safe, long term instruments which give higher returns than bank deposits. The industry has also been campaigning well and the launch of digital SIP options have greatly helped the take-off.

The assets under management for mutual funds grew from Rs 21.36 trillion in March 2018 to Rs 23.80 trillion in April 2019, recording an 11.41 per cent growth. The reasons for high growth in mutual fund assets under management is also fuelled by people’s need to invest in tax saving instruments as the financial year comes to a close.

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As on September 30, 2019, the industry AUM had grown sharply to Rs 24.51 trillion. The Association of Mutual Funds in India said that the total number of accounts in mutual funds stood at 8.56 crore while the maximum investment also comes from retail investors. September 2019 was the 64th consecutive month for the industry to witness a rise in the number of mutual funds investment accounts.

Systematic Investment Plans are investment options to put money in mutual fund schemes at a regular interval – say once a month instead of making a lump-sum investment. The SIP option for most schemes starts for as little as Rs 500 a month. The investment plan is similar to a recurring deposit except it comes with the possibility of higher returns than a bank would normally offer on deposits.

The Association for Mutual Funds in India data shows that the MF industry has added about 9.24 lakh SIP accounts each month during the current financial year. The contribution of SIP to the total portfolio has risen from Rs 67,190 crore in 2018 to Rs 92,693 crore in 2019, making it one of the biggest contributors to the fund inflow in the mutual fund schemes. This is a rise of more than 37% year on year.

Source: AMFI

The Indian growth story has fuelled aspirations of youngsters and millennials have started investing in mutual funds by hordes. The Karvy report stated that around 16 lakh new mutual fund investors last year were millennials between 20-35 years of age, and accounted for 47% of the new investors in mutual funds of Rs 11 lakh crore in FY 19.

“Simplification of norms and standardization and rationalization of schemes along with increased transparency with lower Total Expense Ratio (TER) and the Mutual Fund Sahi Hai educational campaign by AMFI has helped in promoting mutual fund as an investment vehicle,” the report stated.

In terms of individual wealth, it rose from Rs 11.67 lakh crore in 2018 to Rs 13.77 lakh crore in 2019 which is an increase of almost 18% year on year. Out of these, 69% of funds are going in debt instruments through mutual funds while the rest 31% are parked in equity.

The average SIP contributions almost doubled in the last two years from Rs 4300 per month to Rs 8500 per month. The Karvy report predicts that these high growth rates will continue and individual financial wealth in mutual funds will grow at 18.3% to reach about Rs 32 lakh crore by FY24.

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