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India’s retail investors are flocking to equity mutual fund schemes at a pace last seen before the global financial crisis of 2008-09. In the first half of 2015, equity schemes have added 12,000 accounts each day on an average. Put together, the total additional equity folios stand at 2.2 million, taking the overall equity investors’ base to 32.6 million as of June 2015.
The trend is quite a relief for the mutual fund sector, which saw reduction in equity accounts for five consecutive years - from 2009-10 to 2013-14. In particular, the period of 2012-2014 saw closing of nearly 11,500 equity accounts a day. However, the tide appears to have completely reversed after the Narendra Modi-led Bharatiya Janata Party government came to power in May last year.
Milind Barve, managing director of HDFC Mutual Fund, says: “The good part in the recent trend is those who had been buying into gold and other physical assets for many years are now interested in buying financial assets such as equities. Improved sentiment in the market has helped and we’re committed to the approach of introducing investors to mutual funds through SIPs (systematic investment plans).”
Although the current equity investors' base is still far lower than its peak of 41.2 million of 2008-09, sector officials believe it is only a matter of time before it surpasses the previous peaks.
The number of SIPs is on the rise and so is the quantum of investments. With an established performance track record, mutual funds are gaining traction among investors.
Sundeep Sikka, CEO of Reliance Mutual Fund, says: “Investment through SIP mode has seen a visible pick-up. Not only have they improved; the average size is now between Rs 3,500 and Rs 4,000.”
In the first half, the total assets under management of equity schemes (including ELSS or equity-linked saving scheme) surged to Rs 3.72 lakh crore in June against Rs 3.2 lakh crore in December last year, even though Indian shares corrected
10 per cent after touching record highs in March.
Interestingly, during this phase, the net inflows in equity segment only surged to the tune of Rs 43,000 crore, while gross sales hit a massive Rs 90,000 crore. However, fund managers believe it is just a tip of the iceberg and more number of investors will be joining the mutual fund wagon in the coming years.
According to them, in 2007, bank deposits stood at Rs 30 lakh crore while deposits in the equity mutual funds were Rs 2 lakh crore. Currently, bank deposits stand at around Rs 90 lakh crore, while assets in the equity schemes are a little less than Rs 4 lakh crore. This suggests that more inflows are yet to come in equity schemes if the last ratio has to be reached.
