Keep risk appetite in mind as Mutual Fund’s AUM touch all time high

The Mutual Fund market in India is on a roll with burgeoning investment into the industry, especially from the retail segment. If you have invested in equity, the question you are probably worried about right now is whether you should hold your ground, sell and book profits or invest more. The increasing investments into the MF industry can be largely attributed to a steadily increasing interest among the average investor, who wants to invest for long-term, in a systematic way. And so, more investors than before have invested into Mutual Funds via the SIP route.

Here is a look at some data. Overall, the Average Assets Under Management (AAUM) of the Indian Mutual Fund industry for the month of March 2017 stood at Rs 18.58 lakh crore. According to data released by the Association of Mutual Funds in India, the AUM of the Indian MF Industry has grown from Rs 3.26 lakh crore as on March 31, 2007 to Rs 17.55 lakh crore as on March 31, 2017. The increase is more than five times in a 10 year period.

Encouraging news for the home Mutual Fund industry doesn’t stop here. The MF industry’s AUM has tripled in the last 5 years from Rs 5.87 lakh crore as on March 31, 2012 to Rs17.55 lakh crore as on March 31, 2017. Data showed that the total number of accounts, or folios as per Mutual Fund parlance, as on March 31, 2017 stood at 5.54 crore, while the number of folios under equity, ELSS and balanced schemes, wherein the maximum investment is from retail segment, stood at Rs 4.44 crore.

From an investor point of view, experts say that the numerous long-term drivers in the Indian market with the support of government-backed structural reforms can provide attractive growth earnings over the medium term. However, the general view is that even when the MF industry is on a high, an investor should invest strictly in alignment with his financial goals and risk appetite and not according to market conditions.

In the recent past, more than half of the increase in average assets was seen in the top 5 fund houses. The average assets of major Mutual Funds, including ICICI Prudential, and Birla Sun Life, were up by around Rs 2.89 lakh crore. Data also showed that of the 40 fund houses, only four fund houses saw a fall in their average assets under management for January-March 2017.

There has been obvious shift in the investment preferences of the retail investor. The average investor is increasingly becoming financially educated and is aware about systematic investment plan. Indian Mutual Funds have currently about 1.35 crore SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. The growing popularity in SIP has supported in rupee cost averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market. AMFI data shows that the MF industry added about 6.26 lakh SIP accounts each month on an average during the current financial year, with an average SIP size of about Rs 3,200 per SIP account.

This trend of increased retail investments in MFs has been visible for some time. Last year in December too, equity MFs saw an inflow of more than Rs 10,000 crore; this was the highest investment in 18 months and was said to be largely driven due to investor optimism.

Month	SIP contribution (in Crore)
April ‘16-March ‘17	43,921
March ‘17	4,335
February ‘17	4,050
January ‘17	4,095
December ‘16	3,973
November ‘16	3,884
October ‘16	3,434
September ‘16	3,698
August ‘16	3,497
July ‘16	3,334
June ‘16	3,310
May ‘16	3,189
April ‘16	3,122

Source: Association of Mutual Funds in India

An investor foraying into equities should have a time of time frame of at least 5 years and should invest systematically. Also, diversified equity funds can be part of the core portfolio of all investors.

There are enough opportunities in the market at current levels and NAV returns for most funds are likely to be higher over the indices in the longer term. At times of heightened investing into the Mutual Funds industry, investors should generally hold on to their existing investments exposure but within the earmarked asset allocation and work their way according to their risk appetite.