23 October 2018 13:34:54 IST

Individual investors keep the boat afloat through SIPs

Retail and high net-worth individuals hold 53.3 per cent of all assets under management in MFs

Indian investors continue to show faith in mutual fund investments by setting aside a sum every month for systematic investment plans (SIPs). The steady inflow into mutual fund schemes is in fact somewhat shielding the markets from a free-fall, even as foreign institutional investors (FIIs) go on a selling spree.

In the first six months of FY19 (April-September), the inflow (mostly into equity schemes) through the SIP route has been ₹44,487 crore, a 52 per cent jump over the same period in FY18.

Swimming in wealth

In what is seen as an interesting trend and, to some extent, indicative of increasing investor awareness and discipline, is the fact that despite markets correcting steeply from the start of the current fiscal, monthly inflows into mutual funds have ranged from ₹6,690-7,727 crore. As volatility increases, investors seem to be ploughing in more money to average the costs and gain from any potential future rallies.

According to the latest data from industry body AMFI (Association of Mutual Funds in India), asset management companies currently have 2.44 crore SIP accounts, through which regular investments are made by retail investors. Given that investments through the systematic route can be done for as little as ₹500, the equity culture is slowly catching on. The average ticket size of SIP investments on a monthly basis is still moderate at ₹3,165.

But over a period of time, the ticket size and mutual fund penetration are expected to increase as more online platforms and apps come into being.

Retail share rising

The assets managed by the mutual fund industry as of September 2018 stood at ₹24.3 lakh crore, an increase of 13.4 per cent over September 2017, according to data from AMFI. Of the total corpus, 41.9 per cent of the assets are in equity-oriented schemes, up from 36.9 per cent in September last year.

Individual investors (retail and high net-worth individuals) hold 53.3 per cent of all assets under management, while institutions (corporates, banks and such) make up the remaining 46.7 per cent. In absolute terms, individual investors hold ₹12.97 lakh crore of assets as of September 2018, an increase of 24.8 per cent over the same period in 2017. About 87 per cent of the assets under equity-oriented schemes are held by individual investors. In debt funds, the proportion invested by this class of investors is 44 per cent. In liquid and money-market funds, institutional investors dominate the mix.

Love for equity

The composition of individual investors’ holdings indicates that equity is the favoured avenue, with equity-oriented schemes forming about 68 per cent of their assets. Another 25 per cent is held in debt-oriented funds. Liquid/money-market schemes and ETFs (exchange traded funds) account for the remaining 7 per cent. The proposition that equity is a suitable long-term vehicle seems to have found resonance with retail investors.

Investments are not just in tax-saving mutual funds. Inflows are increasing in diversified equity schemes of all hues — large-, mid- and small-caps. Unlike in the earlier market corrections of 2008, 2011 and 2013, retail investors haven’t pressed the panic button and sold en masse in recent years. They have stayed put with equity funds even when markets corrected severely.

According to data from AMFI, as of June 2018, individual investors hold around 7.4 crore mutual fund folios — of which 7 crore are retail and a little over 0.4 crore are HNI accounts. The fact that individual investors hold a majority of the mutual fund investments in India suggests that they are an important force driving the markets.