Mutual funds see muted 2022, expect better days in 2023

New Delhi: After a spectacular 2021, the mutual fund industry failed to continue the momentum this year with the growth in asset base, investors count and flows subsiding in 2022 on volatile market conditions, but the New Year is expected to be relatively better.

The industry grew at a slower pace in 2022, mainly due to global headwinds, including the Russia-Ukraine war, supply chain bottlenecks and a decadal high global inflation coupled with rising interest rates. The 2021 growth was mainly braced by a rally in the stock markets.

The assets under management (AUM) of the mutual fund industry rose by 7 per cent or Rs 2.65 lakh crore in 2022. This was way lower than a surge of nearly 22 per cent or an increase of close to Rs 7 lakh crore in the asset base seen in 2021, data from the Association of Mutual Fund Industry (Amfi) showed.

Swapnil Bhaskar, Head of Strategy, Niyo, said the mutual fund industry growth in 2023 is expected to be in line with the current trend with estimated assets under management of about Rs 44 lakh crore at the end of 2023. The growth would be driven by economic growth and retail participation from young investors.

However, industry body Amfi (Association of Mutual Funds in India) CEO N S Venkatesh believes that the industry will grow 16-17 per cent in 2023, aided by India's growth story, and upcoming budget announcements would support the growth.

The next year's growth would be fuelled by increasing awareness about the benefits of investing in mutual funds across asset classes along with a young generation of investors investing in the space as well as existing investors increasing allocations, said Kaustubh Belapurkar, Director Manager Research, Morningstar Investment Adviser India.

As per the data, the AUM of the mutual fund industry rose to an all-time high of Rs 40.37 lakh crore in 2022 (till November-end) from Rs 37.72 lakh crore at the end of December 2021. It stood at Rs 31 lakh crore in December 2020. The year 2022 also marked the 10th consecutive yearly rise in the industry AUM after a drop in two preceding years. This year's growth in the industry was supported by inflows in equity schemes.

The biggest adopters of mutual funds in 2022 have been young millennials and early Gen-Zs. Despite the volatility in the markets, the young generations are choosing to invest in mutual funds for returns to beat the inflation rates, said Manish Maryada, Co-founder and CEO of investment platform Fello.

The investor count is estimated to have expanded by 1.95 crore during the year. In 2021, a total of 2.6 crore folios were added. The 43-member mutual fund industry saw net inflows of Rs 66,952 crore in 2022 (till November) as compared to Rs 1.88 lakh crore last year. This year's flows included a net withdrawal of over Rs 2 lakh crore from the debt-oriented schemes, while an investment of Rs 1.57 lakh crore into equity schemes.

Equity schemes, the most attractive factor for investors in the mutual fund space in 2022, have got Rs 1.57 lakh crore, as against Rs 96,700 crore in 2021.

These schemes have been witnessing incessant net inflow since March 2021, but the pace of flow slowed in November 2022, when their net inflows falling sharply by 76 per cent to Rs 2,258 crore.