Experts attribute this increased interest in mutual funds to heavy inflows in debt funds.
Household investments in mutual funds and fixed deposits have grown while investments in gold has come down, shows a recent report of RBI.
RBI, in its annual report 2012-13, said that the financial savings has increased by 20 basis points i.e. from 7.5% of GDP to 7.7% on account of investments in mutual funds and fixed deposit whereas household investments in valuables, especially gold, declined from 2.4% of GDP to 2%, a fall of 40 basis points compared to the corresponding period last year.
The central bank said “The marginal increase in the household financial savings rate during 2012-13 emanated from the higher growth in savings under bank deposits and mutual funds even as life insurance funds remained sluggish and outflows under small savings persisted. This could have helped somewhat to buttress household financial savings in 2012-13 and may even show up in an increase in household physical savings. At the same time, the financial liabilities of households increased, largely driven by acceleration in personal loans and retail credit, which dampened household financial savings on a net basis but may get reflected in higher household physical savings during 2012-13.”
Kalpen Parekh, CEO, IDFC Mutual Fund attributes the increase in mutual fund investments to heavy inflows in debt mutual funds.
Aashish Somaiyaa, CEO, Motilal Oswal believes that people have started putting their money into mutual funds due to increase in financial awareness. He says “Last year,debt funds had given decent returns to investors. On the other hand, the prices of gold were hovering around its highest level in the market which led a decline in its demand.”
Gajendra Kothari of Etica Wealth Management says that FIIs and NRIs had parked their investments in debt funds due to high interest rates and tight monetary policies.
