In the last 10 years, India’s mutual fund industry has grown 12.5% annually on average, outperforming the growth clocked by the world and developed regions by more than double, according to a report by the Association of Mutual Funds of India (Amfi) and global analytics firm Crisil. During the same period, Asia-Pacific including India, grew at just 8%.

Assets managed by the Indian MF industry grew to ₹ 23.96 trillion in July this year, up 17.33% from the previous year. “Around the same time last year, there was a rising equity market, low rates on traditional investment products like deposits, a high decibel investor awareness campaign from Amfi and a fine job from the retail distribution community in bringing investors through the SIP route, all of which contributed towards the growth of the industry," said Ajit Menon, executive director and chief business officer, DHFL Pramerica Asset Managers Pvt. Ltd.

The growth in MFs also points to various trends domestically.

Share of MFs in markets goes up: The share of MFs in the amount flowing into the capital markets through portfolio investments rose to 18.4% in March 2018 from 8.5% in 2014. On the other hand, the share of foreign portfolio investors or FPIs (of the total institutional holding) fell to 56.4% from 61.8% of market capitalisation during the same period.

“During the period, domestic investors became bigger than before, particularly after demonetisation. Due to fall in interest rates, investors moved to equities from fixed-income assets. So the impact or mix of FPIs lowered," said S. Krishnakumkar, chief investment officer, Sundaram Mutual.

Vinit Sambre, head of equities at DSP BlackRock Investment Managers Ltd, said, “Rising valuation and risk aversion towards emerging markets is making FPIs nervous."

More savings in MFs: Of the total financial savings and assets in the country, the share of MFs has increased in the last three years to 14% in March this year from 10% in 2016. In the overall debt market, banks and insurance companies still continue to dominate and invest a major chunk of their money in government securities. The corporate debt market, however, receives its highest share from MFs at 34.9%.

Among open-ended funds, 50% of total investment was made in debt funds, followed by 30% in equities and 14% in hybrid funds. “We have seen interest rates steadily rising towards the second half of last year and into this year. As rising yields have an inverse relationship to price, subdued returns on existing investments and uncertainty on the future trajectory of rates prompted corporate investors and HNIs to move investments from longer duration debt funds to liquid-money market funds," said Menon.

SIPs score: In recent years, there has been a dramatic increase in the number of SIP accounts, indicating better understanding of the compounding nature of mutual fund investments through monthly regular instalments. The industry has seen large-scale adoption of SIPs, especially through retail investors. The number of SIP accounts has more than doubled in the last two years.

Number of individual investors up: The last year, ending July 2018, recorded a rise in the number of individual investors in MFs; they make for more than half of the assets. As of March, the industry had about 71 million individual folios, of which 67 million were retail folios, said the report. In the past one year, 16 million retail folios were added, equal to the total number added in the preceding three years.

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