Data from AMFI (Association of Mutual Funds in India) revealed on January 9, 2025, reveal that the assets under management (AUM) of the industry stood at Rs 66.66 lakh crore in December 2024 against a figure of Rs 52.44 lakh crore in January 2024. Moreover, the number of folios – the accounts through which money flows into the industry – has jumped from 16.89 crore to 22.50 crore between the first and last month of calendar year 2024, thereby recording a growth of 33.21%!!! And that too after the bull run ended in October 2024, when FIIs began diluting their holding of Indian equities.
The SIP (Systematic Investment Plan) contribution in December 2024 reached an all-time high of Rs 26,459 crore in December 2024, which mirrors the unwavering trust of investors in this instrument. It is evident from the data that the trickle of investment from Indian households is not only increasing remarkably and could easily turn into a flood. The authorities in the Indian banking system have already expressed their concern that a lot of funds have bene pulled out from the deposits (FDs etc) and invested in mutual funds.
The scourge of inflation vs traditional instruments
Inflation is the single biggest corrosive force in Indian savings and investment instruments. It is a nemesis of traditional investments instruments such as Fixed Deposits (FD) and recurring deposits (RD). While these instruments, mostly available with banks and post offices, are still popular with a large section of the risk averse population, are losing the trust of a rising number of Indians – especially the young ones – who are willing to take measured risks. The advantage with mutual funds is that the investor knows that there is a professionally qualified fund manager who is in charge of managing his/her hard-earne4ed money and he/she doesn’t have to constantly rack his brains over price movements (as in equities). If funds are chosen carefully, healthy double digit compounded annual growth rates are offered by many funds (especially equity-oriented ones).
Mutual funds to the rescue
In this challenging environment, mutual funds have come to offer many things in a single or a few investments. These are risk reduction, diversification, professional management, potential for higher returns. What is more significant is that keeping pace with the rising investment, the number and variety of mutual funds in growing in India. There is a fund to suit perhaps every risk profile and financial goals. In most funds, liquidity is high. There are also funds where risk is minimal and yet the returns are favourable compared to FDs.
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Over the past few years, mutual funds, especially MF SIPS (Systematic Investment Plans) have outsmarted Fixed Deposits (FDs) and equities to emerge as the preferred investment destination of an increasing number of Indians. It is becoming the trusted instrument to generate inflation beating returns. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
