Mutual fund folios see a record 14% increase in fiscal 2016

Mumbai: Mutual funds folios in India rose by a record 14% in the year ended 31 March, indicating growing interest of retail investors in equity-oriented funds.

Mutual funds in India added more than 5.9 million folios to reach a total of 47.7 million in FY16, Crisil Research said on Tuesday, citing data disclosed by the Association of Mutual Funds in India (Amfi). A folio is a unique number given to an investor by an asset management company for investing in a particular fund.

The industry added 1.81 million folios in the March quarter, an increase of 3.95% from the preceding December quarter.

Retail folios increased by 5.45 million, or 13.6%, to 45.4 million in FY16. About 1.71 million retail folios were added in the March quarter, more than the 1.29 million added in the previous quarter. They continued to account for 95% of the total folio base.

“Despite the recent volatility in the equity market, retail investors continued to pour money into equity-oriented funds,” Crisil Research said in a note.

Retail folios in the segment rose by around 4.03 million, an increase of 13.1% to 34.9 million in FY16, accounting for 77% of total retail folios despite the National Stock Exchange’s benchmark Nifty 50, closing the fiscal year down nearly 9%.

“Mutual funds are gaining momentum, where word-of-mouth publicity of satisfied customers is spreading. Independent financial advisors are also expanding their base,” said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co.

The latest quarter saw addition of 1.26 million accounts in the equity segment, the highest since December 2014 when Amfi switched to disclosing data on a quarterly basis instead of half-yearly. Retail folios in the segment marked the sixth consecutive quarter of gains.

“The market share of mutual fund equities is gradually increasing. This is a trend which has just begun. There is huge scope ahead. Equity MFs are less than 1.5% of the total savings of the country,” added Shah.

Folios held by high-networth individuals (HNIs), or those investing Rs.5 lakh or more as defined by Amfi, crossed the 1.8 million mark. This category added around 374,000 folios in FY16 and around 83,000 in the March quarter to tally at 1.8 million. HNIs preferred to invest mostly in equity, debt and balanced funds.

Companies continued to dominate mutual fund assets under management (AUM) with 47% share in the March quarter, against 48% in the December quarter. HNIs were the second biggest contributor with 29% share, while the retail segment’s share was steady at 22%.

Tenure-wise analysis of AUM across investor types and categories showed that 52.9% of retail AUM stayed in equity mutual funds for more than two years, lower than 54.6% in the preceding quarter and 58.5% a year ago.

In comparison, about 24% of HNI AUM stayed invested in equity mutual funds for more than two years, higher than 22.4% in the previous quarter.