Mutual funds (MFs) recorded a 150 percent jump in gross inflows from retail investors during 2021-22 (FY22), even as overall household savings declined 19 percent year-on-year, a report by Business Standard stated.
Quoting data released by the Reserve Bank of India (RBI), BS informed that in FY22, domestic MFs received ₹1.6 lakh crore gross inflows from households.
Given that households saved a total of ₹25 lakh crore in the last financial year, the share of MFs in total gross savings stood at 6.3 percent — the highest in four financial years. In fact, gross inflows into MFs were the highest in at least a decade, the report further revealed.
The massive rise in MF inflows comes on the back of a strong rally in equity markets and poor inflation-adjusted returns for other asset classes, opined the report.
The systematic investment plans (SIPs) offered by MFs proved to be a big source for channelling household savings into MFs, it further stated. According to the Association of Mutual Funds in India data, the industry onboarded over 10 million new investors and received a total of ₹1.2 lakh crore through SIPs in FY22, informed BS.
Meanwhile, bank deposits by retail investors may have plunged 45 percent YoY in FY22, but they still accounted for 26 percent of gross household savings at ₹6.9 lakh crore, informed BS. It further added that the provident and pension funds (including public provident fund) had the second highest share at 23 percent, followed by life insurance funds (17 percent) and small savings schemes (13 percent), according to the RBI data.
This shows that MFs are still only the fifth preferred investment option of retail investors despite their share in total household savings rising from 2 percent to 6 percent within a year, it added.
MFs remain on a high growth path in FY23 as well. The industry added close to 7 million investor accounts in the first five months of the current financial year (2022-23), bringing the total to 136.5 million., highlighted the report.
The sharp increase in MF folio count implies that a lot of new investors are coming into the capital markets and embracing MFs as their preferred vehicle for investing.