Equity schemes and ETFs see sharp surge in investor folios, shows data

Accounts for debt schemes have slipped 10 per cent, shows Amfi report

The domestic mutual fund (MF) industry has seen a sharp surge in investor folios in the equity and passive investing categories. Meanwhile, the number of folios have shrunk on the debt MF side amid weak returns.

The total folios (number of accounts) for the equity-oriented schemes has increased 30 per cent to 84 million from around 65 million a year ago, shows data provided by industry body Association of Mutual Funds in India (Amfi) at the end of February.

Market participants say that rise in the folios is due to sustained inflows into equity funds, launch of several new fund offers (NFOs) and constant participation of investors through systematic investment plans (SIPs).

Since February last year, equity funds have seen net inflows of Rs 1.41 trillion. In the current financial year, equity funds have seen positive flows every month with inflows of over Rs 20,000 crore each in July and December.

“In the last one-year industry has seen inflows into the equity and hybrid schemes which has led to increase in the overall folios in the industry. Investors' contribution through SIPs is also one of the factors for increase in the folios in equity schemes. There has been tremendous traction towards passive schemes in the last few months suggesting investors preference for low cost funds,” said Jimmy Patel, MD and CEO at Quantum AMC.

With continuous rise in equity funds, the SIPs have also seen steady increase over the period of time. In the last 12 months the inflows through SIPs has been nearly Rs 1.3 trillion.

The number of folios for ‘other’ schemes –includes index funds, gold ETFs, and overseas fund of funds –has more than doubled as a large number of new investors have opted to start investing in MFs through passive route.

On the other hand, folios for debt schemes have dipped 10 per cent, signally investors have shun the relatively safer debt schemes in favour of risker equities.

Most of the debt funds category has on an average given returns in the range of 3-5 per cent in the last one year.

“Fall in folios for debt funds is because they were giving very low returns due to the fall in interest rates. We might see some demand for debt funds going forward as the Reserve Bank of India (RBI) is expected to hike rates and returns of short term debt funds are likely to inch up,” a senior official from the  industry, said.

The total folios in the entire MF industry stood at 126.1 million as of February 2022 as against 96.1 million a year ago.