Equity Mutual Fund: Gaining traction as source of household financial savings

The year 2017 ended with a phenomenal growth for the Indian mutual fund Industry. Total asset under management (AUM) of the industry increased by 32.1% in year 2017 and reached to Rs 22.37 lakh crore at the end of December 2017. This is despite huge outflow that we witnessed in the month of December. A total of Rs 1.64 lakh crore of outflow was witnessed in the month of December. This outflow was primarily attributed to outflow from liquid/money market segment of MF.

One of prime factors that led to yearly increase of overall AUM of Indian MF is rise in inflow to equity and equity related schemes. Equity AUM for the month of December touched a new high of Rs 10.08 lakh crore and formed almost 46% of total AUM. Till couple of years back they formed below 30% of total AUM.

The factors that has led to such increase in equity AUM, is rise in leading equity indices that has helped to attract more flow into equity schemes. Besides, physical assets such as gold that had remained the darling of Indian investors has lost its glitter in last few years. Real estate too has not performed well in the same period. According to the yearly data for FY17, released by RBI, we find that investment by households in equity & debentures has increased tremendously. It has jumped four-fold in FY17 and reached to Rs 1.83 lakh crore. As the equity market continues to touch new high every month, we are likely to see FY18 as another year of steep rise in investment in equity & debentures by Indian households. Going ahead we will see India catching up the developed economies in terms of savings by household, which mostly goes into equity and equity related products.