55% retail investors stay put in equity funds for over two years: Amfi

Holding period of HNIs, however, was lower at about 47% as on June 2021

Investors have begun clinging on to their equity schemes for over two years primarily due to the positive returns these schemes have generated and also because mutual funds are increasingly being accepted as long-term financial products. At the end of the June quarter, over 55.6 per cent of retail investors stayed put in equity funds for more than two years, compared to 48.7 per cent in March 2020, shows data from the Association of Mutual Funds in India (Amfi).

Over the past one year, the trend of investors holding their equity funds for more than two years has increased, shows the data from Association of Mutual Funds in India (Amfi). As of March 2021 quarter, the holding was 55.2 per cent and in December 2020 it was 55.4 per cent.  

The data shows that of the total retail equity assets of Rs 7.12 trillion, about Rs 3.96 trillion has remained with investors for over two years. Even as retail investors have continued to invest for the longer term, the holding period of high net worth individuals (HNIs) was lower at about 47 per cent as on June 2021.

Market participants say that this trend has increased as many first-time investors have started investing in mutual funds keeping in view the long term benefits of equity investments.

Sirshendu Basu, head products at IDFC MF says, investors now appreciate the fact that patience is very well rewarded. Time spent in the equity market is more important than timing the entry.

During the past one year, returns generated by equity funds are also one of the reasons investors are staying put in them. The average return of large-cap funds has been around 45.88 per cent in the last one year. Mid- and small-cap funds have returned 64.27 per cent and 88.87 per cent, respectively.

Ashutosh Bishnoi, MD and CEO at Mahindra Manulife MF, says, "We have seen a large number of investors who come through systematic investment plans (SIPs) where they prefer having a disciplined investment approach. Their holding period is now more than five years, which used to be just two years, a few years back."

In July, new SIP registrations stood around 2.38 million, the highest-ever recorded by the MF industry. Investments through SIPs also increased in July, compared to June. The SIP contribution in July stood at Rs 9,609 crore, against Rs 9,155 crore in June, and the AUM rose to Rs 5.03 trillion.

In the current financial year, around 7.46 million new SIPs accounts have been opened in the mutual fund industry." As long as SIPs continue to grow, I don't think there will be sharp redemptions even if there is some correction in the market," added Bishnoi.

However there are some players in the industry who still feel that investors continue to invest as long as they get positive returns and their behaviour will be tested when there is a 10-15 per cent fall in the market.