The Indian mutual fund (MF) industry has shown an impressive growth, especially in the past two decades, not just in the scale of assets under management (AUM) but also in terms of number of folios. The industry size almost doubled in the past three years to Rs21.8 lakh crore in FY17-18 from Rs10.8 lakh crore in FY14-15 and quadrupled in the past 10 years from Rs5.1 lakh crore in FY07-08, says a note from CARE Ratings.
According to the report, growth in equity AUM of about 290% in past five years is more than three times the growth established by debt AUM of around 88%. "Deployment of funds by debt MFs has undergone a major shift in the past five years, in terms of increased allocations to instruments such as corporate debt, commercial paper and reduced investments in certificates of deposit. Focusing on the NBFC sector, investments in its commercial papers reduced post August 2018, while funds deployed in corporate debt paper rose," it added.
The AUMs of Indian MF industry grew at a notably higher compounded annual growth rate (CAGR) of 27% from FY13-14 to FY17-18 and during FY18-19, it grew to Rs22.85 lakh crore as of December 2018, registering 7% growth over March 2018. However, the report says, this growth rate of 7% is much lower compared with the growth rate of 21% registered in December 2017 over March 2017.
As on December 2018, Indian MF industry had a total of 80.3 million folios, out of which about 76% were of equity- or growth-oriented schemes, around 14% of debt- or income-oriented schemes, 8% of balanced schemes and remaining 2% of exchange traded funds (ETFs) and fund of funds investing overseas.
According to the ratings agency, FY18-19 (up to December 2018) has remained a positive year for equity schemes (net inflow of Rs0.9 lakh crore), ETF schemes (net inflow of Rs0.26 lakh crore) and balanced schemes (net inflow of Rs0.12 lakh crore).
"However, debt schemes witnessed net outflows worth Rs0.42 lakh crore during the year. This can be attributed to outflow of Rs2.11 lakh crore from liquid or money market schemes, which invest in short term assets such as treasury bills, certificates of deposit and commercial paper, etc. This was mainly due to a rising interest rate scenario in FY2019 which made bank fixed deposits (FDs) more attractive than debt MFs, as they offer better returns at lower risk. Also on account of the non-banking finance companies (NBFC) liquidity issue, mutual funds moved away from such investment in debt instruments to an extent," it added.