Mutual Funds add 72L folios in 2020, experts say there’s still immense potential

Indian asset management companies added as many 72 lakh folios in 2020, a significant rise as against 2019 numbers when 68 lakh investors opened their folios over the year, Association of Mutual Funds in India (Amfi) data stated.

As per the data, the number of folios with 45 fund houses rose to 9.43 crore at the end of December 2020 from 8.71 crore at the end of December 2019.

This is simply because showcasing a positive trend, people last year kept on adding mutual fund investments during the market correction due to Covid 19 and the recovery phase as well. "Pandemic has made savers save more and the fund industry intensify efforts to be completely digital," said President of DSP Investment Managers Kalpen Parekh.

Echoing similar views, Amit Trivedi, personal finance coach and author of Riding the Roller Coaster, said due to the lockdown, there was very limited scope for discretionary spending, which meant that the savings in many cases would have gone up - various reports by the Reserve Bank of India support this argument. The fear of the pandemic also worked to push investors to save more

Most often during market corrections, people tend to sell their investments in panic, and by not having done so in 2020 the mutual fund investors have shown a certain level of maturity this time.

Our investors also have matured to invest more at lower prices and 2020 gave that opportunity, Kalpen added.

Pointing out another aspect, Trivedi said, "the stock markets witnessed a very fast and unexpected recovery post the lows of March 2020."

Mutual funds were available online - people could transact from the comforts of their homes - many other investment avenues were not available during the months of strict lockdowns, he added.

In 2018, over 1.38 crore investor accounts were added, more than 1.36 crore in 2017, nearly 70 lakh in 2016 and close to 56 lakh in 2015.

The number of folios under equity and equity-linked saving schemes rose by 27 lakh to 6.52 crore at the end of December 2020, which is much higher than 12.75 lakh added in the preceding year.

Debt-oriented scheme folios count rose by 15.84 lakh to 86.74 lakh. The number of investors' accounts was at 71 lakh in December 2019.

Also, the industry's Assets under management (AUM) surged by an impressive 17 per cent to ₹31 lakh crore at the end of December, from ₹26.54 lakh crore at the end of December 2019.

Harshad Chetanwala, co-founder MyWealthGrowth.com told PTI, said the potential is still immense. "If we consider an average of 3-4 folios per unique investor in mutual funds, that means there are just around 3 crore unique investors at present. Hence, there is lot of potential for the industry in the coming years."

"In the year 2021, investors will continue to invest in mutual funds and the folio count is expected to grow further. Lot of investors are showing interest and looking up to mutual funds as a core part of their investment plan for their long term as well as short term goals," he added.

(Inputs from agencies)