Aniruddha Chowdhury/Mint
Aniruddha Chowdhury/Mint

Retail equity assets in MFs are up 58%

Retail investors are shifting from direct equity to mutual funds. Retail equity folios are up 7.6%

The positive turn in the equity market, which started last year, has seen higher retail participation, and much of it from mutual funds (MFs). According to data from the Association of Mutual Funds of India (Amfi), number of retail folios for equity-oriented funds has increased 7.6% year-on-year, as on 31 March 2015.

Data from Prime Database, a data aggregator focused on the primary capital market, shows that the total retail equity assets under management (AUM) for MFs have increased 58% in April 2015 from last year.

The top five asset managers contributed 57% of this. The average growth among the top five asset management companies (AMCs) with equity retail assets has been 67%. Reliance Asset Management Co. Ltd saw the biggest jump of 119%.

“The equity market rising is a factor but our long-term track record and brand recall has also helped us garner more assets," said Sundeep Sikka, chief executive officer, Reliance Capital AMC.

A reason for the rise in retail equity assets could also be the shift of retail investors from direct equity to MFs. “Investors are beginning to understand that portfolio management is best left to professional fund managers," said Pranav Haldea, managing director, Prime Database. Its data shows that retail holding, on an aggregate basis, in companies listed on the National Stock Exchange (NSE) has increased only marginally from 21.35% as on 31 March 2015 from 20.99% on 31 March 2014.

“Markets have got investors interested, but they also realize that MFs have given consistent performance. Efforts to increase awareness about equities and MFs, too, has helped. Investors recognize that for smaller amounts, MFs offer better diversification," said Abhishake Mathur, head investment advisory, ICICI Securities Ltd.

This shift has benefitted even smaller AMCs. Of the smaller fund houses, Motilal Oswal Asset Management Co. Ltd has clocked the highest growth in retail assets—it saw a rise of 531% to 377 crore in April 2015 from the previous year. The base was low, but the increase shows that retail investors are taking time to choose their funds.

Other small- to medium-sized fund houses, too, have seen healthy growth—Axis Asset Management Co. Ltd, 207%; BNP Paribas Asset Management India Pvt. Ltd, 189%; and Edelweiss Asset Management Ltd, 180%.

“Of the 1.1 million retail investors with the fund house, 200,000 are first-timers," said Chandresh Nigam, managing director and chief executive officer, Axis AMC.

Scope for more

While more retail investors are moving towards MFs, overall, however, the share of retail equity assets has fallen from 61% in April 2014 to 53% in April this year, show Prime Database numbers. This means that it’s still easier to get chunky assets from other categories. For instance, contribution from high net worth individuals to total equity AUM increased to 33% from 27% last year.

Retail equity assets for the beyond (top) 15 cities have grown almost 56% for the year (till April 2015), but as a proportion of total equity assets, this has fallen from 23% to 20%.

The current market dip may make you want to put a pause on equity investments. However, data shows that regular investments, whatever be the market mood, is the best recipe for long-term returns. So stay invested.

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