India adds over 51 lakh new mutual fund investor accounts

Folios are numbers assigned to the accounts of individual investors. Several folios are possible for investors. The mutual fund space has seen steady growth in the number of folios over the past few years.

In order to achieve long-term financial goals, investors are increasingly choosing equities because they are recognized as a value-creating asset class. This increased investor knowledge is fueling the development of investments in equity-based schemes.

3.17 crore new investor accounts were added in 2021-22, 81 lakh in 2020-21, 73 lakh in 2019-20, 1.13 crore in 2018-19, 1.6 crore in 2017-18, more than 67 lakh in 2016-17, and 59,000,000 in 2015-2016.

The industry is benefiting from factors such as growing mutual fund (MF) awareness, robust distribution channels and simplified transaction processes thanks to digitalization, which has been further accelerated by the COVID-19 outbreak.

This can be attributed to a number of variables, including rising inflation, rising bond yields and the Federal Reserve’s hawkish views on interest rates, according to Priya Agrawal, financial coach at LXME.

Although there were fewer folios in April-June of this year than in the March quarter, there was still an increase, showing that investors continued to invest despite the market turbulence.

According to her, the current financial year seems to be improving in terms of portfolio growth. Among the factors likely to affect this industry are market conditions, geopolitical circumstances, inflation rates, financialization of assets and growing public awareness, she continued.

“The majority of retail mutual fund investors invest in equity funds. Market conditions will have a role to play in increasing the number of folios and investors. Participation will increase when stock market stability will come back, which may happen in the next few years, so we believe mutual fund reach and penetration will increase this fiscal year,” said Harshad Chetanwala, co-founder of MyWealthGrowth.com.

Data shows that 43 fund companies had 13.46 crore folios in June 2022 compared to 12.95 crore in March 2022, an increase of 51 lakh over the previous three months.

In May 2021, the industry hit the 10 crore folio milestone. In the June 2022 quarter, there were over 10.72 million folios under equity, hybrid and solutions-based plans, where the majority of investments came from the retail sector, an increase of nearly 4% compared to the previous quarter from January to March.

“Individual participation is expected to continue to increase in the future as mutual fund penetration is still low relative to its true potential. As we see greater awareness of mutual funds , we will see the participation of individuals increasing,” Chetanwala said.

According to LXME’s Agrawal, the multiple factors that have enabled the growth of the mutual fund industry are an increase in digitalization, availability of easy-to-consume information, increased awareness and a shift in mindset from traditional instruments to more recent ones, especially stock-based ones. funds because investors are increasingly aware of the importance of having instruments capable of fighting inflation in their portfolios.

Although the number of folios has increased significantly in recent years, less than 3% of Indians have exposure to mutual funds.

An additional 35 lakh folios have been added in equity-based schemes on the addition of 51 lakh. From 8.63 crore in the March quarter to 8.98 crore in the June quarter, investor accounts in equity-based plans (both open and closed) increased.

The number of folios for debt-focused schemes (both open and closed) decreased from 2.43 lakh to 73.65 lakh during the reporting period.

Liquid funds, which continue to have the most folios in the debt category, are followed in order of number of folios by short duration funds, corporate bond funds, ultra short duration funds, overnight funds and short term funds respectively (6.11 lakh).

(With contributions from the agency)

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Dolores W. Simon