Just 4% of financial savings is in mutual funds: Karvy

To be precise, nearly 3.63% of financial savings is invested in mutual funds in FY 2015-16, shows the latest Karvy Wealth Report 2016. In absolute terms, individual wealth in mutual funds stood at Rs. 6.23 lakh crore last fiscal, up from Rs. 5.52 lakh crore in FY 2015.

In the report, the company has said that the wealth held by individual investors in mutual funds grew by almost 13% in just a year. Karvy expects MFs to grow at a faster pace as compared to other financial assets in the long run. In fact, it has estimated that the share of mutual funds in financial savings is likely to reach 5% by FY 2020-21.

The report has attributed this growth to investors changing preference from direct equity to mutual funds. “For mutual funds, FY16 was a positive year, despite the volatility in the equity markets. The surge in investments could also be explained by the flight of retail investors from direct equity into this professionally managed asset class. The extent of the divergence vis-a-vis traditional equity becomes clearer when we observe that interest in MFs did not recede even during the late months of January and February 2016, when the Sensex and Nifty came off nearly 15%,” states the report.

Surprisingly, the report found that appetite for direct equity among Indian investors is declining. Only 17% of financial assets or Rs. 29.63 lakh crore is in direct equity in FY 2016 compared to 21% or Rs. 34.40 lakh crore in the preceding fiscal.

According to the report, individual investors wealth in financial assets stood at Rs. 172 lakh crore which is higher than the physical assets at Rs. 132 lakh crore as on March 2016.

Source: Karvy Wealth Report