Demonetisation has been a big growth driver for the Indian mutual fund industry, leading to a surge in assets and sending stocks to new heights.
As investors rushed to deposit cash in their bank accounts, banks were flooded with funds. With few avenues to lend and liquidity high, banks reduced their rate on fixed deposits. At the same time, returns on other assets such as real estate and gold weren’t too great either, which led to investor money flowing into mutual funds. “Demonetisation was good for mutual funds,” said Nilesh Shah, managing director, Kotak Mutual Fund. “Money f lowed from bank accounts to mutual funds.”
