As we draw the curtains on another eventful year, there is no doubt that we have witnessed an accelerated evolution of the mutual fund industry over the past few years.
2021 has been a year where government continued its focus on providing ample liquidity, lowered interest rates and increasing rate of vaccination. While sectors across the economy bore the brunt of the pandemic, the BFSI sector, especially the mutual fund sector witnessed path-breaking growth. Not only did we witness benchmark indices (Sensex and Nifty) scaling record highs, we also saw retail investors joining the equity cult and supporting markets despite heavy outflows from foreign institutions.
As we are stepping into a new-world order, let us try to look at some of the major learnings for the mutual fund industry during 2021
Enhanced digital experience: As governments were forced to adopt a second lockdown, businesses had no option but to jump-start their complete digital metamorphosis. No longer are we talking about a paperless transition but we are setting the foundation for a complete digitally-enabled customer experience. The success of hybrid working models will only further cement this propaganda.
Today, the industry is gearing for well-developed digital channels and a top-notch customer experience. Most fund houses have entire dedicated teams that work solely on empowering an experience-based culture for customers. Newer tools have been adopted for the benefit of the distributors and RIAs so that the financial solution matches the user’s needs and expectations.
Growing popularity of passive funds: While actively managed funds will continue to remain significant, we are also witnessing growing acceptance of passive investment strategies. Currently, passive funds are a small portion of the total AUM but features like low cost and simple structure will make this most sought after product going forward.
In fact, mounting on the back of strong demand from investors, increased awareness initiatives by fund houses, several AMCs have launched multiple innovative passive products in India. The emergence of smart-beta ETFs and innovative indices that track sectors and top performing companies is a sign of maturity amongst the Indian investors.
Leveraging the global growth story: With the advancement of technology and digitalization, an investor has access to not only Indian markets but also global markets. Mutual funds offer an array of products, which invest globally in sunrise sectors such as electric vehicles, AI, renewables; opportunities which might still not be available on the Indian exchanges.
With the launch of various foreign fund of funds, not only is the mutual fund industry re-aligning itself to leverage the power of companies with a global stature but also aiming to benefit from focusing on emerging sector plays which our investors might otherwise not have access to. The journey will now move from ‘risk-adjusted returns’ to ‘risk-adjusted (global) returns’
Not staying invested is the biggest opportunity cost: If an investor chooses not to stay invested in the market, due to a downside fear, they run the risk of missing out over the long term. An investor can choose from a gamut of investing options, which can match the risk appetite and personal goals.
Investors need to understand that the opportunity is now - if they wish to get on the growth bandwagon, they must invest in the correct assets.
Outlook for 2022
We are at the cusp of a long term bull market driven by several tailwinds which we believe should propel India’s growth for the coming decades.
The important fact that we are driving home across all our engagements both online and offline is our conviction in the growth potential of the Indian economy. It is essential to not only look at the proverbial ‘disruptors’ but also those companies that are enabling this disruption.
To conclude, there is never a bad time to enter the markets. More so, a correction (even a minor one), can be used to top up and reposition your portfolio to build long term wealth. Frequent corrections amidst a rising bull market is a healthy sign and more importantly a wealth creation opportunity. We believe, investing well is job half done and staying invested for long period of time is the other half which investors should give equal weight to create wealth.
Click here to read the document on our market outlook on 2022. Happy investing!
Chandresh Nigam is the MD & CEO of Axis Mutual Fund. The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.