As we have seen the Assets under Management (AUM) base of the mutual fund industry in India surge to over Rs 23 lakh Crores in FY 17-18, a lot of focus has been attributed to the market performance and the positives in the economy and the world markets in general. However, in India a crucial factor in increased investor confidence and increased base of investor has been the constant and consistent investor awareness campaigns and drives done by several significant stakeholders in the mutual fund industry.
This shows in the data of SIP growth published by CAMS. While in the top 15 cities (called T 15), SIP registrations increased by 89% last year, the growth rate in the next 15 cities (B 15) was 95%. There were around 53 lakh new SIP registrations in these B 15 cities as against 61 lakh new SIP registrations in the T 15 cities which are more matured in their investment history in mutual funds.
This signifies two critical shifts.
Retail Participation across geographies:
The growth in the Mutual Fund industry is being propelled by increased retail participation not just in the top 15 cities, but also the good news is that mutual fund as an investment tool is slowly becoming a preference of investors in smaller towns as well. So there is increased retail participation in cities like Indore,Patna, Ludhiana like there is increased retail participation which we have seen in Pune, Bangalore and Mumbai. It’s a healthy trend for the industry and this should propel more and more fund houses to invest in investor awareness in smaller towns and rural India where traditional assets still play the pivotal role even though they aren’t giving healthy real returns.
Moving from Physical Assets to Financial Assets:
The writing is on the wall. At relatively lower returns from traditional deposits, gold and real estate getting really unpredictable, investors have shown a clear shift in their investment habits. They are shifting from physical assets to financial assets and in financial assets, MFs are increasing its share in the pie with every passing year. With continuous investor education, retail investors are looking at the SIP way to wealth creation. The distributing agents and advisors are also playing a crucial role in making customers understand the concept of asset allocation, risk based investments and investment horizon.
With technology making things (especially financial services) simpler and more accessible for everyone around, investing in mutual funds is also becoming user friendly and simpler by the day. I hope we reach a point when Rural Bharat also embraces mutual funds the way they have embraced mobile telephony. Till that point the entire chain of Banking and financial services, including mutual funds, have to keep re-inventing themselves. Investing your own money and planning for your future cannot be complex , should not be complicated .It is up to us to make mutual funds simple for the customer to understand , invest and transact. The power and scope of wealth creation through SIPs in the equity markets cannot be restricted to a few cities or a few aware minds. Mutual Funds should be a viable investment option for every investor in India.
The penetration of mutual funds in the semi urban and rural markets is happening at a very fast pace, because of the technological advances and the reach of the mobile phone network. Large fintech and ecommerce players like Scripbox, The ET money Mobile application, Paisa bazaar, PayTM, Flipkart etc have either already started or slated to start mutual fund distribution.We would see a host of new customers invest in mutual funds and experience a new mode of investing. It will become very important to handhold these customers well during their initial journey so that they have a good experience. Thus we truly believe that we should see this industry add 3x or 4x the number of customers in the next few years.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.