India’s mutual fund investors are showing remarkable resilience amid global volatility and uncertainty, Venkat Nageswar Chalasani, chief executive of Association of Mutual Funds of India (Amfi), told Mint in an interview.
Despite geopolitical tensions, foreign portfolio investment outflows, and inflation, inflows into systematic investment plans remain strong at ₹30,000 crore per month. But with stoppage ratios spiking, is the road ahead getting tougher?
Chalasani seemed confident that investor confidence is back as the trend reversed in May, with new SIP (Systematic Investment Plan) registrations once again outpacing closures. Edited excerpts:
What are the pressing pain points for Amfi?
The most pressing challenge at present is navigating an environment of heightened market volatility and persistent global uncertainty. Several macroeconomic and geopolitical factors are contributing to this, including geopolitical tensions, FPI outflows, elevated inflation, relatively high interest rates, uncertainty about AI-driven market trends, and the narrowing interest-rate differential between the US and India.
These developments have created short-term fluctuations in the markets, which can understandably influence investor sentiment. At Amfi, our continued focus is on reinforcing the importance of long-term investing through sustained financial literacy and investor awareness initiatives. Our priority is to ensure that investors remain informed, avoid making decisions based on short-term market movements, and stay focused on their long-term financial goals.
How are investors coping with this uncertainty?
Investors have, by and large, demonstrated remarkable resilience in the face of the current uncertainty. The most encouraging indicator is the continued strength of SIP inflows. Mutual funds are consistently receiving around ₹30,000 crore every month through SIPs, reflecting investors' confidence in the long-term prospects of the Indian economy and capital markets.
This resilience is the result of sustained investor education and continuous engagement by asset management companies (AMCs), distributors, and Amfi. Over the years, investors have increasingly understood the importance of staying invested through market cycles and have embraced disciplined, goal-based investing rather than reacting to short-term market movements.
We remain highly optimistic about India's long-term growth trajectory and the opportunities it presents for wealth creation. While short-term challenges and periods of market volatility are inevitable, they do not alter the underlying structural strengths of the economy.
Are MF investors becoming resistant to tepid market returns, reflected in elevated SIP stoppage ratios earlier this year?
Broadly, mutual fund investors fall into two categories: those who invest through lump-sum allocations and those who invest regularly through SIPs.
We are observing that the approximately 95 million SIP accounts, contributing an average of ₹3,000 per account, have remained largely stable. Although both March and April recorded more SIP account closures than new registrations, resulting in stoppage ratios exceeding 100%, the trend reversed in May, with new SIP registrations once again outpacing closures.
More importantly, it is the composition of these closures that warrants attention. A higher stoppage ratio does not necessarily indicate investor disenchantment. Some investors may have achieved their financial objectives and therefore discontinued their SIPs. Others may have paused investments to reassess their portfolio strategy. For example, investors may have shifted from category-specific schemes to flexi-cap funds, where fund managers have the flexibility to allocate capital across large-, mid-, and small-cap stocks. In such cases, investors may close an existing SIP before initiating investments in a different scheme.
Overall, SIP investors have demonstrated considerable resilience.
Is there a possibility of an impact on SIP flows if uncertainty-induced volatility persists?
Through our investor awareness and education programmes, we consistently communicate the benefits of disciplined investing, particularly during market corrections. When markets decline, SIP investors accumulate more units at lower prices, which can enhance long-term wealth creation through rupee-cost averaging.
Consider an investor earning ₹10,000-20,000 per month and contributing ₹2,000 through an SIP. Because the investment is automatically debited each month, it becomes a financial habit. Such disciplined behaviour tends to continue unless market weakness is both prolonged and severe.
Investors today also have a greater appreciation for the fact that market volatility is temporary and an inherent part of investing. Through investor awareness campaigns and media initiatives—including the Rohit Sharma campaign—we continue to reinforce a simple but powerful message: stay invested, remain patient, and focus on long-term goals rather than short-term market movements.
A substantial portion of the industry's investor growth occurred between 2019 and 2024, a period characterized by strong market returns interspersed with episodes of volatility. Investors who remained invested through these fluctuations experienced the benefits of long-term compounding, and those experiences continue to shape investor behaviour.
Despite this, monthly SIP inflows have increased from approximately ₹19,000-20,000 crore during peak growth to nearly ₹30,000 crore now, underscoring the resilience of retail participation.
Are you satisfied with promoting micro SIPs for gig workers and freelancers?
Today, the mutual fund industry serves approximately 63 million investors, but a significant portion of the population still remains outside the formal investment ecosystem. Encouragingly, around 55% of SIP accounts originate from B30 locations—cities beyond the top 30 urban centres, including many Tier-II and Tier-III markets—while the remaining 45% come from T30 cities. However, despite accounting for a larger share of SIP accounts, B30 locations contribute less than one-fifth of the industry's assets under management. Similarly, while nearly 40% of monthly SIP contributions come from B30 centres, about 60% continue to originate from T30 cities.
These numbers highlight the significant headroom for growth in smaller cities and emerging markets. They also underscore the importance of deepening financial awareness and expanding access to investment products beyond the major metropolitan centres.
Newer AMCs often struggle with lower expense ratios compared with established players, which can better absorb distribution costs...
These are natural challenges that most new entrants face in any industry. While newer AMCs may require time to achieve scale and profitability, they also benefit from several structural advantages that help mitigate these initial hurdles.
First, the Basic Expense Ratio (BER) framework follows a telescopic structure, whereby the permissible expense ratio declines as a scheme's assets under management grow. This allows smaller fund houses to charge relatively higher expense ratios than larger peers managing comparable schemes, providing them with greater flexibility to cover distribution, operational, and servicing costs during the growth phase.
Second, the industry ecosystem today is far more supportive than it was for earlier entrants. Through Amfi, a number of commercial arrangements and industry-wide engagements have already been established with key stakeholders, including index providers, transaction platforms, banks, and registrar and transfer agents. As a result, new AMCs do not have to build every relationship from scratch.
Third, investor awareness and acceptance of mutual funds have improved significantly over the years. Today, approximately 55% of households are aware of mutual funds, largely due to the industry's sustained investor education and outreach efforts.
Fourthly, new entrants also benefit from a well-established industry ecosystem. A trained and registered distributor network is already in place, providing access to a broad distribution channel from the outset. Similarly, investors who have completed the KYC process with one AMC can seamlessly invest across any of the industry's 56 asset management companies, reducing friction and facilitating customer acquisition for newer players.