The Growth of the Mutual Fund Industry In India?
Mutual Fund Sahi Hai ??
“Mutual find Sahi hai”, has been the prominent message to help users understand the value of long-term investing in the equity market. Especially SIP-based mutual fund investment has been a life-changing tool to generate wealth for one and all.
Even though awareness about Mutual investment has been rising, but still lot of work has to be done to increase its market adoption. Before we jump into decoding magical numbers, let’s define
What Is Mutual Fund?
As per Investopedia:
A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.
Professional asset managers manage the collected money and allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. The Mutual fund portfolio is structured to suit the investor’s risk profile and investment objectives stated in its prospectus.
How Investing in Mutual fund Differs from Stock Market Investing?
Investing in a share of a mutual fund is different from investing in shares of stock. When you invest in a mutual fund you do not get any voting rights as the equity/shareholder, instead, you are invested in a bucket of stocks (or securities) which has a certain value defined as the net asset value (NAV) per share, sometimes expressed as NAVPS.
So, when you buy a unit or share of a mutual fund, you are buying the performance of its portfolio or, more precisely, a part of the portfolio’s value. and by no means, you become a shareholder to gain voting rights.
A fund’s NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding.
We will cover In the Future:
- How do mutual fund work?
- What are the different types of Mutual Fund?
- How to choose the right mutual fund based on your risk appetite?
But we will skip these topics for now, as we want to focus more on the story based on stats, which the MF industry has been posting to show, it has grown to become 36.59 trillion economies in India recently in Aug 20201.
Let Numbers Say It All:
As per official data reported on the AMFI site;
Total asset under management as of Aug 2021 stood at ₹36,59,445 crore(36.59 trillion), this is a 5x increase from 6.95 trillion to 36.5 trillion in just a span of 10 years.
In the last 5 years, MF industry/s AUM has seen a CAGR(compound annual growth rate) of 20.6 percent, and equity-oriented AUM has increased at a CAGR of 25 percent.
Journey To 36 Trillion:
MF’s AUM crossed the historical milestone of 10 trillion(10 Lakh crore) in May 2014, then it registered a 2 fold growth to hit a 20 trillion milestone mark in Aug 2017, in Nov 2020 MF AUM rose to 30 trillion to eventually hit a major milestone of 36.59 trillion in Aug 2021.
Total MF Folios Or Investor Account Under Management:
In May 2021 MF industry reported a major milestone of 10 crore folios/investor accounts and currently as of August 31, 2021, it stood at 10.86 crores (108.6 million). It is also interesting to know that maximum participation has come from the retail segment with 8.95 crores (89.5 million) investor account.
What’s In Store For Future?
Even though the total AUM in MF has risen to 36 trillion, but still its penetration in the Indian markets is low as compared to its global peers. With a rising investor base, increase in disposable income, more retail awareness, and the ease of investing via digital products, we can expect this trend to change fast in the coming future.
As per CRISIL :
Assets under management (AUM) in equities saw a CAGR growth rate of close to 13.5% in the past 10 years between March 2010 to March 2020. It also projects that this AUM will be at 15% CAGR, from the period between March 2020 to March 2025.
AMFI a Industry body Association of Mutual Funds in India has set an optimistic target of Rs 95 lakh crore AUM and 130 million investor folios by 2025.
Summary:
The numbers and the growth that has been registered so far in our Mutual Fund industry has been quite promising, but the journey has just begun, it has not yet become a household name, so until it captures the imagination of each and every household in India where it becomes a DeFacto tool for a hedge against rising inflation, work is not yet done.
What needs to be done is to leverage all the digital and print media channels to educate about the value this financial instrument has to offer at scale. Many fintech startups like FinMapp, Groww, ETMoney, Paytm Money, INDMoney have to come forward to offer personalized MF solutions. Government has to invest more to enhance customer awareness, finance needs to become a compulsory subject in schools and colleges to increase financial literacy among Indian families
Consumer trust and education are what will change the game for this promising MF industry and can see burgeoning growth in the coming 10 years or so.
“Mutual sahi hai ” if you know what is right for you and how much risk you can take
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