Mutual funds add over 3 crore folios in FY22 on sharp rally in equity market, digitisation

New Delhi: Increasing awareness about mutual funds, ease of transactions through digitisation and sharp surge in equity markets have aided asset management companies to add a staggering 3.17 crore investor accounts in 2021-22, with experts saying the trend is likely to continue this fiscal as well.

This was a significant rise from 2020-21 when 81 lakh accounts (or folios in mutual fund parlance) were opened, data with the Association of Mutual Funds in India (Amfi) showed. The ongoing financial year too appears to be promising in terms of folios as increase in investor accounts will enable people to move beyond fixed deposits and savings accounts, said Priti Rathi Gupta, founder of LXME, a financial platform for women.

Market conditions, geopolitical situations, inflation rates, financialisation of investments and increasing awareness among the people are some of the elements that may have an impact on this industry, she added. If the retail investors get spooked by the market turbulence driven by change in interest rates, then folios are expected to decline, said Swapnil Bhaskar, Head of Strategy, Niyo — a millennial-focused neo-banking fintech.

According to the data, the number of folios with 43 fund houses rose to 12.95 crore in March 2022 from 9.78 crore in March 2021, registering a gain of 3.17 crore during the one-year period. The industry crossed a milestone of 10 crore folios in May 2021.

The number of folios under equity, hybrid and solution oriented schemes, wherein the maximum investment is from retail segment, stood at about 10.34 crore as of March 2022.

Folios are numbers designated to individual investor accounts. An investor can have multiple folios. The mutual fund space has been witnessing consistent growth in folio numbers in the past few years.

It saw an addition of 73 lakh investor accounts in 2019-20, 1.13 crore in 2018-19, 1.6 crore in 2017-18, over 67 lakh in 2016-17 and 59 lakh in 2015-16. Some tailwinds that are supporting the industry include increasing mutual fund awareness, strong distribution platforms and ease of transactions through digitisation, which was further driven by the COVID-19 pandemic.

According to LXME's Gupta, multiple factors have enabled the growth in MF folios, like an increase in digitisation, availability of easy-to-consume information, increased awareness, and a mindset shift from traditional instruments to mutual funds as the investors are expecting good returns based on past market outperformance despite the pandemic.