Over 81 lakh new investors join mutual fund industry in April-May

The mutual fund industry has added over 81 lakh new investors in the first two months of the fiscal year 2025. As per PTI, this is due to consistent marketing efforts, celebrity endorsements and dedicated work of the distribution network.

Investors surge

This surge is driven by changing perceptions about fixed deposits, which now offer less competitive returns compared to mutual funds. Trivesh D, COO of stock trading platform Tradejini, told PTI that rising income levels and easier access to financial markets have also contributed to this trend.

The outlook for mutual fund folios remains positive, supported by a bull run in the stock market, robust risk management practices, continuous investor education, and consistent marketing efforts. Experts believe that the industry will continue to grow as savers seek alternative avenues to build long-term wealth.

Abhishek Tiwari, CBO of PGIM India Mutual Fund, highlighted that as India's per capita income grows, more investors are turning to asset classes that can outperform inflation and generate wealth. This increased interest in mutual funds has led to a higher folio base.

According to the Association of Mutual Funds in India (AMFI), the industry had 18.6 crore folios at the end of May, a 4.6% increase from 17.78 crore in March. This marks an addition of over 81 lakh folios, with 45 lakh added in May alone, surpassing the average monthly addition of 22.3 lakh folios in 2023.

This growth has been fueled by effective marketing, celebrity endorsements, a strong distribution network, robust equity returns, and the ease of investing. Interestingly, Gen-Y and Gen-Z investors, who are increasingly using digital channels, are driving this surge.

The industry had 4.59 crore unique PAN and PAN-exempt KYC reference numbers as of May 2024. Equity-oriented mutual fund schemes saw the most significant increase, with 61.25 lakh new folios, bringing the total to 12.89 crore, representing 69% of all folios.

Within the equity funds category, sectoral/thematic funds saw the highest growth, followed by small and mid-cap categories. Hybrid funds added 3.31 lakh folios, with Multi Asset Funds seeing the most significant increase.

Conversely, debt scheme folios dropped by 72,940, totaling 70.92 lakh. Despite a decline in household savings since the Covid pandemic, the mutual fund industry's assets have reached Rs 59 lakh crore. As of FY23, mutual funds represented 6% of total household savings, with bank deposits remaining the largest at 35%.

PGIM's Tiwari emphasized that while mutual funds are gaining popularity for their convenience and diversification, there is still significant potential for growth.

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