Earning is the key motivator for the people to work, some part of it gets spend and the rest goes into savings. But savings in bank deposits and FD gets eroded due to rise in inflation. Keeping ideal cash is not a good idea as such because one compromises on the opportunity cost of investing that money and growing it.
India now has inflation of 5% that means the purchasing power of the money at disposal will get down. So what is the best option to get the return but bearing some risk is investing in equities?
| Month | SIP Contribution ₹ core | ||
| FY 2018-19 | FY 2017-18 | FY 2016-17 | |
| Total during FY | 29,102 | 67,190 | 43,921 |
| March | 7,119 | 4,335 | |
| February | 6,425 | 4,050 | |
| January | 6,644 | 4,095 | |
| December | 6,222 | 3,973 | |
| November | 5,893 | 3,884 | |
| October | 5,621 | 3,434 | |
| September | 5,516 | 3,698 | |
| August | 5,206 | 3,497 | |
| July | 7,554 | 4,947 | 3,334 |
| Jun | 7,554 | 4,744 | 3,310 |
| May | 7,304 | 4,584 | 3,189 |
| April | 6,690 | 4,269 | 3,122 |
It somehow becomes when it comes to mutual funds industry. Source: AMFI INDIA
KEY DRIVERS FOR GROWTH:
- Mutual fund sahi hai: The industry had launched, in March 2017, the investor awareness campaign aimed at creating awareness and breaking the myths around mutual funds. The campaign got a very positive response as mutual fund companies saw an overall addition of 32 lakh new investors over the last one year. The industry also witnessed AUM growth of 25% (Rs.4.25 lakh crore) and 38% (Rs.3.25 lakh crore) growth in retail AUM as on February 2018 compared to March 2017. The total number of folios and SIP accounts in the same period saw a growth of 26% (1.05 crore) and 52% (70 lakhs), respectively. Monthly SIP contribution for the industry touched Rs.6,425 crore from Rs. 2.05 crore SIP accounts.
- Demonetization has been a big growth driver for the Indian mutual fund industry as investors rushed to deposit cash in their bank accounts, banks were flooded with funds. With few avenues to lend and liquidity high, banks reduced their rate on fixed deposits. At the same time, returns on other assets such as real estate and gold are not good options to invest in owing to high restriction imposed on them.
WHY MUTUAL FUND?
REAL ESTATE: investing in real estate comes up with huge investments offers less liquidity and not regulated.
GOLD: the investment in gold is high with less diversification .currency fluctuation will lead to high risk.
BANK DEPOSITS: the return on bank deposit becomes negligible after accounting for inflation. Banks only offers 3% to 4% returns.
CORPORATE BONDS: subject to tax implications while mutual funds are tax exempt and less costly.
Assets under Management (AUM) as on July 31, 2018, stood at ₹23.06 lakh crore.
The AUM of the Indian MF Industry has grown from ₹ 5.41 trillion as on 31st July 2008 to ₹23.06 trillion as on 31st July, 2018, more than a fourfold increase in a span of 10 years!!
The MF Industry’s AUM has grown from ₹7.61 trillion as on 31st July, 2013 to ₹23.06 trillion as on 31st July, 2018, more than a threefold increase in a span of 5 years!!
The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first time in May 2014 and in a short span of about three years, the AUM size had increased more than two folds and crossed ₹ 20 trillion (₹20 Lakh Crore) for the first time in August 2017. The Industry AUM stood at ₹23.06 Trillion (₹ 23.06 Lakh Crore) as on 31st July, 2018.
The total number of accounts (or folios as per mutual fund parlance) as on July 31, 2018, stood at 7.55 crore (75.5 million), while the number of folios under Equity, ELSS and Balanced schemes, wherein the maximum investment is from retail segment stood at 6.31 crore (63.1 million). This is 50th consecutive month witnessing a rise in the no. of folios (Source: AMFI INDIA).
Manjit Kaur
MBA-FA (2018-20)