TO BUY MUTUAL FUNDS This September
Lohit Bharambe and Yogesh Supekar track the trend in mutual fund investing in India and, in association with Neerja Agarwal, bring to you 7 of the most promising mutual funds to invest in, “THIS SEPTEMBER”
RISING RETAIL INVESTORS IN INDIA
Indian equity markets may have entered into a consolidation phase currently after hitting record highs but the markets for sure are witnessing good amount of interest from retail investors in India. In fact, the domestic investors' participation has been the highlight of Indian equity markets since last couple of years.
It looks like equity culture in India is finally making inroads. For this, lot of credit should go to the mutual fund industry for spreading awareness on the asset class that has outperformed all the other asset classes in the long run.
The irony of Indian equity bull run has been the lack of participation from Indian retail investors, so far. Retail investor participation in India has not been impressive even as foreign investors were seen lapping up Indian equities since the dawn of liberalisation and economic reforms. Every nation has its own investing culture and it is a wellknown fact that nations such as the Unites States and United Kingdom lead when it comes to equity investing.
The World Bank gives importance to the ratio of stock market capitalisation to gross domestic product (GDP) and includes it in one of the hundreds of parameters in judging the economic development of the nation. India’s stock market capitalisation to GDP ratio was 12 per cent in 1990 and now it stands at around 96 per cent (as on August 2017). The Indian stock market capitalisation rose from $13 billion in 1990 to $2.36 trillion (August 24, 2017); that is ~181.5-fold increase.
What is interesting to note is that the rise in the valuation of the Indian stock market was hitherto driven by foreign investors. Foreign investors alone invested a net amount of $183 billion in the stock market since April 2000 till December 2016. The retail investors' participation has been paltry in comparison.
The retail participation has not only improved in mutual funds but also in the life insurance segment. Life insurance AUM has reached close to ₹30 lakh crore in FY2016-17, thus reflecting a steady growth of 19 per cent for the period. This growth in life insurance industry was seen due to increase in new business premium and increased persistency ratio. The growth in AUM could also be due to a healthy rally in equity markets. The investments in ULIPS (Unit Linked Insurance Plans) showed a steady growth of 27 per cent, reaching ₹7.50 lakh crore. This reflects that the insurance industry is gaining momentum.
We can safely say that due to extremely good performance of equity markets last fiscal, the participation of retail investors increased in both the mutual fund industry and the insurance industry.
INVESTORS PREFER SIP ROUTE
The SIP route of taking exposure to equities in India seems to be the flavour of the season once again as more and more investors log in to invest in their preferred mutual fund scheme systematically. According to CAMS data, there are almost 30 lakh SIP accounts with ticket size ranging between ₹1000 to ₹2499, out of which the B15 cities have almost 27 lakh such accounts. While the same data source suggests there is some traction seen in the SIP ranging between ₹2500 and ₹4999, it clearly reflects that majority of retail investors are willing to test waters with smaller ticket sizes in equity markets by taking the SIP route for MF investing.
AMFI data shows that the MF industry had added 8.23 lakh SIP accounts each month on an average during FY2017-18, with an average SIP size of about ₹3,250 per SIP account.
Even today I see there is lack of awareness about mutual fund investing in B15 cities. As a MF distributor, I am conducting lot of MF awareness programmes, but I do feel more needs to be done when it comes to creating awareness. I see that the ticket size of SIP is between ₹5,000 to ₹10,000 per month for my basket of investors. Most of the investors come seeking for MFS in the mid and small-cap space. Sachin Rane, MF distributor