MF industry assets surge by Rs 11 lakh crore in 2023; crosses Rs 50 lakh crore mark

New Delhi: After a lacklustre performance in 2022, the mutual fund industry saw a substantial rebound in 2023 with its asset base surging by nearly Rs 11 lakh crore, reaching over Rs 50 lakh crore mark fuelled by an optimistic equity market, awareness about financial stability and a robust economic expansion.

"This noteworthy achievement comes against the backdrop of India's growth story, highlighting the MF industry's ability to win investors' trust by providing low-cost, long-term-oriented wealth creation avenues," the Association of Mutual Fund Industry (Amfi) said on Monday.

The year 2023 has seen a substantial increase in overall inflow reaching Rs 2.74 lakh crore. This was supported by the increasing popularity of Systematic Investment Plans (SIPs), which drew in Rs 1.84 lakh crore.

The inflow has pushed the assets under management (AUM) of the mutual fund industry by 27 per cent, adding Rs 10.9 lakh crore in 2023.

This was way higher than the 5.7 per cent growth and Rs 2.65 lakh crore increase in AUM observed throughout 2022, as well as the nearly 22 per cent growth and close to Rs 7 lakh crore addition to the asset base in 2021.

According to the data, the asset base rose from Rs 39.88 lakh crore in 2022 to an all-time high of Rs 50.78 lakh crore in 2023.

The asset base stood at Rs 37.72 lakh crore at the end of December 2021 and Rs 31 lakh crore in December 2020.

The year 2023 also marked the 11th consecutive yearly rise in the industry AUM after a drop in two preceding years. This year growth in the industry was supported by inflows in equity schemes, especially through SIPs.

"While the MF industry took almost 50 years to build the first Rs 10 lakh crore of AUM, the last Rs 10 lakh crore, from Rs 40 lakh crore to Rs 50 lakh crore was amassed in just over a year," Venkat Chalasani, Chief Executive of AMFI, said.

The industry saw a net inflow of Rs 2.74 lakh crore in 2023 as compared to an inflow of over Rs 71,000 crore in the preceding year. The huge inflow could be on the back of sustained investors' interest in equity funds, arbitrage funds, and index funds & ETFs.

"The bull run, awareness about financial stability post the pandemic and overall positive sentiment have encouraged retail investors to invest in equities and many retail investors have opted for the MF route," Jean Christophe Gougeon, Director & Chief Marketing Officer of Sharekhan (a BNP Paribas subsidiary), said.

Flows during 2023 included an investment of Rs 1.61 lakh crore in equity-oriented schemes and over Rs 87,000 crore in hybrid schemes, however, there was an outflow to the tune of Rs 46,000 crore in debt schemes.

"For the year 2023, the net flows for equity funds stood at Rs 1.61 lakh crore, with 39 per cent or Rs 63,949 crore coming into mid and small-cap mutual funds. Sectoral/thematic funds were the next best category, garnering Rs 30,841 crore for the year. Large-cap and focused funds were the only two sectors with negative inflows of around 1.7 per cent each," Gopal Kavalireddi, Vice President of Research at FYERS, said.

Melvyn Santarita, Analyst - Manager Research at Morningstar Investment Research India, noted that both the midcap and the small-cap indexes have seen a sharp rally over the last 6 months and one year. Consequently, investors have also flocked to these categories with ever-increasing flows.

The number of unique mutual fund investors more than doubled over the last five years from 1.91 crore in December 2018 to 4.21 crore in December 2023.

Investors have shown confidence in SIPs, with inflows surging to an impressive Rs 1.84 lakh crore in 2023, surpassing the entire amounts for 2022 (Rs 1.5 lakh crore), 2021 (Rs 1.14 lakh crore), and 2020 (Rs 97,000 crore).

In fact, monthly inflows through SIP, which have been the bedrock of mutual funds flows for many years now, have attracted above the Rs 17,000 crore mark in the last two months. It was at Rs 17,610 crore in December and Rs 17,073 crore in November.

"The more encouraging aspect is the constant retail participation in a disciplined manner through the SIP route. The B30 locations have instilled a new drive in the MF investment," AMFI's Chalasani said.

Gold, which acts as a good portfolio hedge, especially during the volatile market, adverse economic scenario and geopolitical events, witnessed an inflow of nearly Rs 2,200 crore.

Over the years, investors' comfort with digitisation, ease of access, and a wider palette of products to choose from have been a reason for Gold ETFs becoming an option.