Mutual Funds, which have been around for decades in the country, is now emerging as one of the best investment options for investors to park surplus cash.
In the current scenario, interest rate on saving deposits is as low as 3.5 per cent, while the same is around 6.25 per cent for fixed deposits. Besides, gold has lost its sheen and real estate is in bad shape so mutual fund is surely a good alternative for investors.
Indian mutual fund industry has been witnessing phenomenal growth since 2014 and the assets managed by the country’s 42 players doubled over the last three years to a staggering Rs 21 lakh crore in September-end.
The industry’s assets under management (AUM) had surpassed Rs 10 lakh crore milestone for the first time in May 2014 and in a short span of three years, the asset base has more than doubled to Rs 21 lakh crore at the end of September 2017, as per information available with Association of Mutual Funds in India (Amfi).
The assets base of the industry were at Rs 19.52 lakh crore during the April-June quarter.
The rise in the AUM could be attributed to strong participation from retail investors along with high net worth individuals that attracted investments in both debt and equity segments.
The retail investors are increasingly investing in mutual Funds through SIPs (Systematic Investment Plans), which helps them reduce market timing risk. Currently, all the fund houses together receives around Rs 5,000 crore per month through SIPs, which is a very healthy number.
In addition, investors’ awareness campaigns by asset management companies and industry body Association of Mutual Funds in India (Amfi) has helped in increasing penetration of the instrument.
“Another trend that we have witnessed is the spectacular increase of flows into mutual funds, especially equity funds since the demonetisation announcement,” Kaustubh Belapurkar, Director, Manager Research at Morningstar said.
“While this cannot solely be attributed to effects of demonetisation, rather a culmination of the combined efforts of the entire industry value chain to reach out to the investors and educate them on the benefits of investing. The move of money into a more formal economy post demonetisation has only further helped increase the attractiveness of mutual funds as an investment avenue,” he added.
According to Anshul Saigal of Kotak Mutual Fund this is the right time for investors to put in their money in mutual funds because other asset class like gold and real estate are not giving desired returns.
“First time investors should take SIP route to invest and I suggest that it is better to start at early age. Young generation should put in a big portion in equities,” he added.
