Mutual fund AUM surges 33% in January, investors tapping market dips for growth

The Indian mutual fund industry is experiencing a surge in assets under management (AUM), with a 33.11 per cent year-on-year rise in January 2024. The surge in AUM is the highest rise since September 2021, when the year-on-year growth in AUM was 36.78 per cent. The average assets under management (AAUM) rose 29.62 per cent on a year-on-year basis to Rs 52.89 lakh crore in January 2024. This growth is the highest since September 2021, fueled by both strong SIP inflows and additional purchases triggered by market corrections.

In an exclusive interview with Bizz Buzz, Manish Mehta, National Head - Sales, Marketing & Digital Business at Kotak Mahindra AMC, sheds light on the industry's performance, investor behavior, and future outlook

Kindly throw some light on the industry’s performance…

Industry recorded a higher net equity sales number. SIPs input value is about Rs 18000 crore. The merging trend is at lower market levels, investors continue with SIPs and make additional purchase. January saw a few days of sharp correction and investors seem to have taken benefit of that by doing lumpsum purchase. The net sales have come a little higher compared to last month. If you see the way the investors have been behaving, the SIP numbers continue to remain strong. In case the market sees a correction, there are additional purchases being made by investors. In fact, we saw few days of sharp market correction where investors seem to have made additional purchase besides SIP inflow. SIP+ lump-sum is the mantra to take advantage of market volatility.

Which kind of investors is coming in?

Here I mean all kinds of investors. Assuming that the SIP book is at Rs 17,500-18,000 crore this month, and the net sales is at Rs 21000 core that clearly shows 2,000-3,000 of additional purchases that have happened. When we meet with distributors and inquire on investor behavior, as far as investments are concerned, the general feedback we get is that when the market falls, we get more calls for additional purchases rather than concerns. That is a very encouraging trend and maturity that we have started to see among investors. On a sharp correction it is looked at as an opportunity to add a little bit of mutual fund to the portfolio.

How do you see the things going forward by the fiscal and end of this year?

General feedback from distributors is that the experience of investors in mutual funds has been very positive, and they are open to adding a little bit more exposure to equity funds. SIP registrations month on month have been showing an encouraging trend, but on market corrections they will take the opportunity to add a little bit more money.

Can you give projections on the numbers?

There have been months that we have seen that the markets have done very well and the net inflow in the industry is as much as what the SIP number is. So in both months when you analyse the data you get a feeling that while the SIPs are continuing, the investor is taking some money off the table also. That’s the way the trend has been that, in a month when the market is very high, it is SIP less redemption, in months that the markets are correcting, it is SIP plus additional purchases. We believe this trend should continue going forward.

Which of the funds are the flavour of the season currently?

Mostly people are looking at diversified funds. It is not any particular type of fund that they are looking at. AMFI data will show you that money is coming in Flexi Cap, Multi Cap, the kind of funds where overall exposure for the investor is across Large Cap, Mid Cap, Small Cap across all kinds of products. Then you look at hybrid products like multi-asset allocation, balanced advantage, where depending on the model, people take equity exposure. Diversified products are broadly the trend that we are seeing.

People are saying that it is at its peak and the bubbles may burst when the election results are out. That may affect the flow to mutual funds as well.

It is difficult to predict market behavior. For the moment, flow data is suggesting that overall investment experience of investors has been positive. Awareness about SIPs and their benefits is there and we are seeing new investors starting their MF journey through SIPs. Existing investors whose experience has been positive are taking advantage of market corrections by adding lump sum investments.

The industry through its various investor awareness initiatives has been educating investors about the long term benefits of mutual funds, SIPs and importance of staying on course for long term wealth creation and not trying to time the markets. Time in the market is important than timing the market.

How do you see the NFOs?

The month of January saw some NFO launches, though there was no mega NFO per se. And industry will continue to see NFO launches as the mutual fund companies fill their product basket through the NFOs.

What will be your message to the retail investors?

Keep your faith in the market. Stick to your asset allocation for long term wealth creation.