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The share of individual investors in the mutual fund industry’s total assets increased to 61.4% in December 2024, up from 60.1% in December 2023.
In absolute terms, the value of assets held by individual investors grew by 40%, rising from Rs. 30.70 lakh crore in December 2023 to Rs. 42.58 lakh crore in December 2024.
Kolkata MFD Saibal Biswas notes that investors are increasingly shifting from traditional investment options to mutual funds. He points out that the younger generation, in particular, is less interested in fixed assets and is moving towards equities and mutual funds, which is driving the contribution of individual investors in the total MF AUM.
Overall, the mutual fund industry saw a 36% increase in assets under management (AUM), which grew from Rs. 51.09 lakh crore in December 2023 to Rs. 69.33 lakh crore in December 2024.
Institutional investors accounted for 38.6% of total assets, with their holdings increasing by 31.20%, from Rs. 20.39 lakh crore in December 2023 to Rs. 26.75 lakh crore in December 2024. Corporates hold 94% of institutional assets, with the remainder held by Indian and foreign institutions and banks.
Equity funds lead the way
Equity-oriented schemes now account for 60.6% of total industry assets, up from 56.5% in December 2023. This growth underscores the strong preference of individual investors, who contribute 88% of the assets in this category.
"Asset allocation has gone for a toss in the last couple of years as investors increasingly believe that equity is the only way to grow their wealth," says Saibal Biswas, a Kolkata-based MFD. He added, "This mindset is driven by the market's stellar performance, which has led to unrealistic expectations of continuous growth. As a result, funds previously allocated to debt have shifted to equity, and most SIP inflows are now equity-oriented. Asset allocation, unfortunately, has taken a back seat."
Agra MFD Shefali Satsangee of Funds Vedaa, believes the surge in equity investments is driven by strong market performance over the past year or two and due to change in taxation of debt funds. She said, "Although the market has seen some correction in the past two months, investors are largely drawn to equity due to its performance post-COVID."
Nitin said that the primary driver behind the rise in equity investments is the current economic and global situation, coupled with high inflation. With fixed or debt interest rates failing to outpace inflation, investors are turning to equities as a means to build wealth and maintain financial stability. As a result, investors have little choice but to take on exposure in the equity markets.
Debt-oriented schemes saw a decline in their share, dropping to 14.6% of total industry assets in December 2024 from 17.5% in December 2023. Meanwhile, the market share of exchange-traded funds (ETFs) also fell slightly to 12.3% in December 2024, compared to 12.9% in the previous year.
