Mutual funds witnessed an overall expansion in their asset base by Rs 3 lakh crore in the year 2018. The trend is expected to continue in the upcoming year 2019.
In spite of the underlying volatility, such a rise could happen owing to the consistent increase in the SIP flows and dedicated participation from the retail investors.
Association of Mutual Funds in India (Amfi) data reveals that the asset under management (AUM) increased to Rs 24 lakh crore in 2018 as compared to a mere Rs 21.26 lakh crore increase in the previous year. The estimates show the addition of new investors by over 1.3 crores throughout the year. Moreover, the folios in equity funds and balanced fund categories increased to 6.7 crores.
Equity Linked Saving Schemes (ELSS), known for their tax advantage, have alone grabbed an inflow of around Rs 1.15 lakh crore. The progress is optimistic in the backdrop of the IL&FS default which had caused a temporary liquidity crunch in the market.
It is expected that the same trend of AUM growth will continue in the year 2019. There are several reasons for this phenomenon. Firstly, the mutual fund market remains highly untapped and is likely to grow due to increased geographical penetration and technological advancements.
Besides, the continuous endeavour of Amfi towards increasing mutual fund awareness is going to act as a tailwind in this respect. Owing to increased financial literacy, investors are likely going to adopt a Systematic Investment Plan (SIP) as the preferred mode of investment. This will not only increase the overall folios but also boost the underlying asset base of the fund houses.
SEBI’s efforts to increase the transparency and cost-effectiveness of the product has functioned as a game changer. Investors have been gradually shifting their investments from physical assets like real estate and gold. Additionally, a surge has been noticed in the investments flowing into financial assets like mutual funds.