In a big surge, mutual funds have added over Rs 6 lakh crore to their asset base in 2017 and the uptrend is likely to continue in the new year, helped by a spirited promotion campaign by the industry and post- demonetisation resurgence of financial investment products.
The industry is looking at an increase of nearly 40 percent to the total asset under management (AUM) as the year 2017 draws to a close, after attaining a record level of Rs 23 lakh crore at November-end itself — up from Rs 16.46 lakh crore at the end of December 2016. The investor count is also estimated to have risen by over 1.7 crore during the year.
Moreover, the fund houses are expecting similar ‘healthy’ growth in AUM to continue in the New Year as the penetration levels of mutual funds are still very low in the country and various reform measures initiated by the regulator Sebi should help too.
“Low penetration of mutual funds in India is one of the key factors which will drive growth, coupled with increasing levels of financial literacy and lack of suitable alternatives for long-term wealth creation,” Franklin Templeton Investments India President Sanjay Sapre said.
“Further, technology is likely to be a key enabler of growth to deepen reach and build scale using the trinity of Jandhan, Aadhaar and the Mobile (JAM) for everything from KYC to payments. This will not only help improve distribution reach across the country but will also reduce costs and improve ease of investing,” he added.
In 2017, the total asset base of all 42 active fund houses put together has surged by an impressive about 40 percent. The growth was 24 percent over the last five years.
The industry’s AUM had crossed the milestone of Rs 10 lakh crore for the first time in May 2014 and in a short span of about three-and-a-half years, the asset base shot up more than two-fold to Rs 23 lakh crore in November-end.
This would be the fifth consecutive yearly rise in the industry AUM, after a drop seen for the two preceding years.
The spike in bank deposits and consequent decline in interest rates following demonetisation on November 8, 2016 has also helped mutual funds.
“Demonetisation effect, decline in interest rate on traditional assured returns product like fixed deposit, shift from physical to financial savings as real estate and gold were lacklustre and increasing initiatives on enhancing investor awareness have all aided in such impressive growth in the industry,” Sapre said.
The industry has been running a very ambitious investor awareness campaign, ‘mutual fund sahi hai’ or mutual funds are right for the investor and the experts feel it may have added considerably to the growth.
Further, consistent delivery of returns by the industry and prudent risk management assisted in increasing the penetration of mutual fund products, Kotak Mutual Fund CIO Equity Harsha Upadhyaya said.
Moreover, a sharp rise in systematic investment plans (SIPs) has promoted more sustainable growth for the industry as more people moved away from the concept of large lump sum investments.
Fund houses have garnered over Rs 53,000 crore through SIPs — a preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk.