Mutual fund sector adds 81 lakh accounts, total folios reach 18.6 crore

New investors surge: The mutual fund sector in India has seen a substantial increase, adding 81 lakh new investor accounts in the first two months of the 2024-25 fiscal year.

This growth has brought the total number of mutual fund folios to 18.6 crore by the end of May, reflecting a 4.6 per cent increase from the 17.78 crore recorded at the end of March.

Fuelled by strategic marketing

This expansion is primarily driven by effective marketing campaigns, endorsements from celebrities, and the active efforts of the distribution network. 

Additionally, evolving perceptions of fixed deposits, which are now seen as less competitive compared to mutual funds, along with rising income levels and better access to financial markets, have also contributed to this growth, according to Trivesh D, COO of Tradejini.

Looking forward, the outlook for mutual fund folios remains optimistic. 

This is supported by the ongoing positive trend in the stock market, robust risk management practices, continuous investor education, and sustained marketing efforts. 

Experts anticipate continued growth as more savers turn to mutual funds as a means to achieve long-term financial goals.

Abhishek Tiwari, CBO of PGIM India Mutual Fund, highlighted that as India’s per capita income increases, investors are likely to seek investment vehicles that can outpace inflation and build wealth. This will likely lead to a higher number of mutual fund accounts in the industry.

Digital investing among millennials

In May, the industry added 45 lakh folios, following 36.11 lakh additions in April. This surge is notably higher than the 22.3 lakh average monthly additions seen in 2023, fuelled by strong returns from equity investments and the ease of investing facilitated by digital platforms. 

Digital channels have become the preferred method for many new investors, particularly amongst the younger generations—Millennials and Gen Z.

As of May 2024, there were 4.59 crore unique PAN and PAN-exempt KYC reference numbers, suggesting that while investors may hold multiple folios, the total number of unique investors continues to grow. This growth is expected to be driven by more distributors and advisors in rural areas, greater adoption of technology, smartphones, and a growing awareness of mutual funds.

Growth in sectoral funds

Equity-oriented mutual fund schemes saw a significant increase, adding 61.25 lakh folios, reaching a new high of 12.89 crore, which now represents 69 per cent of all mutual fund accounts. 

The sectoral/thematic funds category experienced the largest growth within the equity funds, with 23.19 lakh new folios added. 

Hybrid funds also contributed to this growth, adding 3.31 lakh folios, bringing the total to 1.35 crore, with Multi Asset Funds seeing the most significant increase within this category.

Conversely, debt scheme folios slightly decreased by 72,940, totalling 70.92 lakh. The appeal of mutual funds has been further enhanced by some funds outperforming market indices, attracting investors in search of superior returns.

Room for expansion

Despite a decline in household savings since the COVID-19 pandemic, from Rs 23.29 lakh crore in 2020-21 to Rs 14.16 lakh crore in 2022-23, mutual fund assets have risen to Rs 59 lakh crore. This growth reflects mutual funds' increasing popularity for their convenience, diversification, and ease of investment. However, as Tiwari noted, mutual funds still represent a small portion of total household savings, indicating the potential for further growth.

(With PTI Inputs)