Indian Mutual Fund industry witnesses growth, doubling folios to touch 17.79 lakh crore: ICRA Analytics

New Delhi [India], April 17 : The Indian mutual fund (IMF) industry has experienced an expansion over the past five years, with the total number of folios nearly doubling to reach 17.79 lakh crore in March 2024, compared to 8.97 lakh crore in March 2020.
This surge in folios is attributed to increasing awareness and growing interest among retail investors in equity and bond investments through mutual funds, according to a report by ICRA Analytics.
The widening reach of asset management companies (AMCs) beyond the top 30 towns has played a significant role in encouraging more individuals to explore mutual funds as a viable investment avenue.
As per ICRA Analytics, the expansion of AMCs' branches has led to greater accessibility and awareness, contributing to the surge in the number of folios.
Retail investors have emerged as the driving force behind the growth in folios, accounting for approximately 91.3 per cent of the total folios in the mutual fund industry as of December 2023.
High Net Worth Individuals (HNIs) hold around 8 per cent of the total folios, while institutional investors represent less than 1 per cent.
It's worth noting that these figures represent the number of accounts rather than unique investors, as an investor may hold multiple accounts across different funds.
On an annual basis, the total number of folios registered a robust growth of nearly 22 per cent from March 2023, reaching 14.57 lakh crore.
Commenting on the trend, Ashwini Kumar, Senior Vice President and Head Market Data at ICRA Analytics, emphasized the role of increasing awareness and financial literacy, particularly among residents of smaller towns and cities, in driving the growth of mutual fund folios.
Kumar highlighted the substantial potential for further growth, given the relatively low mutual fund penetration in the country.
He cited the burgeoning middle class, rising financial literacy, and professional fund management capabilities as factors likely to fuel the addition of new folios in the coming years.
Kumar said, "Increasing awareness about the various investment options among people, primarily from smaller towns and cities, growing financial literacy, and the surge in interest among retail investors for investing in equities and bonds through the mutual fund route are all contributing to the healthy growth in folios. However, mutual fund penetration is relatively low in the country so there is a lot of scope for growth."
He added, "The burgeoning middle class and rising financial literacy coupled with professional fund management capability of mutual funds and regulatory oversight is likely to add confidence thereby prompting more and more people to resort to better financial planning so as to accrue savings and this will lead to a good surge in the number of new folios being added in the coming years."
Equity-oriented funds dominate the mutual fund landscape, accounting for 68.7 per cent of the total schemes, followed by Exchange Traded Funds (ETFs) and Fund of Funds at 11.7 per cent, and hybrid schemes at 7.7 per cent as of December 2023.
Retail investors exhibited an average ticket size of Rs 84,890 per account in December 2023, marking a 20 per cent increase compared to the previous year.
Furthermore, the industry's total Assets Under Management (AUM) more than doubled in the last five years, reaching Rs 53.40 lakh crore in March 2024 from Rs 22.26 lakh crore in March 2020. Equity-oriented schemes witnessed a nearly 10 per cent growth in inflows, fueled by increasing investments across various categories including sectoral, flexi cap, and large and mid-cap funds.
Despite the surge in AUM, total redemptions from open-ended equity-oriented schemes decreased by nearly 21 per cent over the last five years, reflecting retail investors' inclination towards long-term investments.
The AUM of large-cap, mid-cap, and small-cap funds witnessed significant growth over the same period, with mid-cap and small-cap funds experiencing particularly robust expansions.
While small-cap funds registered net outflows in March 2024, Kumar expressed confidence in their long-term appeal due to regulatory enhancements and the government's commitment to driving economic growth.