Mutual Funds Industry Witnesses Best AUM Rise in Two Years: Data

Driven by optimism due to strong gains in stock prices, the average assets under management (AUM) for the mutual fund (MF) industry surged by 9%  during the third quarter ended September 30, 2023.

The development underscores the highest quarterly growth for the MF industry since September 2021. 

Also, for the second consecutive quarter, the AUM growth crossed the  5% mark. The industry’s average quarterly AUM rose by 16% in the first half of the financial year 2023-24 (Q1FY24), tipping at Rs 47 lakh crore. The growth in AUM is related to factors such as market performance and fresh investments. 

Considering the inflow trend and the performance of various indices, a huge chunk of the growth was related to small-cap and mid-cap funds. In the first six months of FY24, Nifty Mid-cap 100 and Nifty Small-cap 100 experienced a respective surge of 35% and 42%.

Contrary to this, the large-cap index, Nifty, jumped by a mere 13%. 

India’s MF industry has been experiencing a consistent rise, with a spike in AUM in recent years. Between FY 2016 and FY 2019, the AUM in the MF industry rose at a rate of about 22.94%, with projections predicting it could reach about Rs 918.54 lakh crore by FY 2024. 

This growth highlights the rising importance of a savings culture prevailing in the country and the growing affinity towards systematic investment plan (SIP) schemes. Individual and institutional investors are expected to contribute significantly to the market’s growth in the next few years.

However, the MF industry has to face challenges in the form of the efficiency of AMCs, particularly issues related to market penetration beyond tier-1 cities. A considerable number of companies tend to limit their investments to developing and maintaining distribution channels, particularly in tier-1 cities alone. This affects the prospectus of a broader adoption of mutual funds across the country.