The continued popularity of mutual funds among retail investors has increased the number of mutual fund folios across all fund houses in India to the record high level of 5.8 crores. This data recorded by the Securities and Exchange Board of India (SEBI) in June 2017 indicates a growth in the number of folios by an estimated 93 lakhs from data recorded in June 2016.
As per SEBI’s June 2016 data, the total number of folios was approximately 4.89 crores across all 42 fund houses operating in India. The sustained growth to the current level is also evident from the figures recorded in March 2017, which showed an increase in investor account to the 5.54 crores level. In terms of value too, the increase is significant- overall infusion in mutual funds has increased by Rs. 93,400 crores with the ELSS itself accounting for Rs. 28,000 crores compared to the previous year.
The main increase in the number of folios appears to have come from retail investors based in smaller town and cities of India after SEBI started providing additional incentives to fund houses for expanding into smaller cities. Other key factors that have played in this increase include superior penetration of mutual funds, sustained rally in equity markets, increase in investor education programs and lower interest rates on deposits.
According to some experts, many of the folios added during this boom time may not be around when the predicted market correction occurs in the future. Other experts are however of the view that such increase is set to continue as the mutual fund AUM to GDP ratio for India is currently only 13% as compared to more than 50% in Brazil, 69% in the EU and 90% in the US.