They say that the rising tide lifts all boats. Amid the ongoing bull run, equity mutual funds jumped in their valuations, so much so that the industry’s overall asset size went higher by nearly 23 percent this calendar year until Nov 30.
On Dec 31 last year, total assets under management (AUM) of the mutual fund industry stood at ₹39.88 lakh crore. The asset size has now risen to ₹49.05 lakh crore by Nov 30, 2023, showing a jump of 23 percent in the first eleven months of 2023.
The experts assert that the euphoria started to build post pandemic in 2021 and the gradual rise in this bullish sentiment has incentivised retail investors to invest.
Sridharan Sundaram, founder of Wealth Ladder Direct, says the market index moved upward in the past three years i.e., in 2020, 2021 and 2022 — a phenomenon that can be credited for attracting a higher number of investors.
Equities schemes rule the roost
It is vital to note that the spike in inflows in equity mutual funds was noticeably higher than that in debt schemes. Cumulative inflow into equity funds for the year 2023 stood at ₹1,44,576 crore, more than four times the cumulative inflow in debt mutual funds of ₹29,470 crore.
The AMFI data clearly shows that investors are investing more money into equity schemes while whittling down their investment in debt plans.
Sample this: The equity-oriented schemes’ share grew to 54.9 percent of the industry assets in Nov 2023 vis-a-vis 51.7 percent in Nov 2023. Conversely, the proportionate share of debt-oriented schemes was 18.5 percent of industry assets in Nov 2023 against 19 percent a year ago.
Consequently, the total AUM of equity mutual funds stood at ₹20.33 lakh crore on Nov 30, 2023, whereas the debt schemes’ AUM hovers around ₹13.57 lakh crore.
Ajit Menon, CEO, PGIM India Mutual Fund, attributes higher investment in equity to increased awareness.
“An increased awareness of the impact of external (inflation, economic slowdown, stability of job) and unexpected events (hospitalisation, loss of income) has prompted people to be more concerned about their financial stability. Mutual Funds as an avenue to invest for long term goals like retirement is rising,” he says.
At the same time, Preeti Zende, Founder of Apna Dhan Financial Services, credits the bull run and overall positive sentiment for rising investment in equity.
“Global concerns seem to be getting cooled off, crude prices are under control, and investors are hoping to see a stable government in the forthcoming Lok Sabha polls. All this leads to a positive sentiment among investors, thus motivating them to continue their SIPs. And those who never invested in mutual funds have kicked off their investing journey,” she says.
To round up, we can state that the bull run and overall positive sentiment have wooed retail investors to invest in equities, and many of them have opted for the mutual fund route to get an exposure, thus pushing the overall asset size of the mutual fund industry upward.
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