New Delhi, Jan 24: Mutual funds added 72 lakh folios in the pandemic ravaged year 2020 as higher disposable income and low interest on bank deposits attracted investors towards this financial instrument.
In comparison, the industry had seen the addition of 68 lakh investor accounts in 2019, data with Association of Mutual Funds in India (AMFI) showed.
Folios are numbers designated to individual investor accounts. An investor can have multiple folios.
According to the data, the number of folios with 45 fund houses rose to 9.43 crore at the end of December 2020 from 8.71 crore at the end of December 2019, registering a gain of 72 lakh folios.
In the year 2020, many investors added to their mutual fund investment during the market correction due to COVID-19 and the recovery phase as well, said Harshad Chetanwala, co-founder MyWealthGrowth.com.
“First-time investors chipped in during this period as the markets were looking attractive and existing investors diversified their investments in new schemes as well. Both these actions did result in new folio creation,” he added.
According to him, the number would have been higher, but a segment of investors also opted to book profits and shuffle from non-performing funds to a better option, which is quite natural.
Harsh Jain, co-founder and COO of Groww, said digital investment platforms have made the onboarding and account opening seamless, increasing accessibility to mutual funds.
The popularity of direct mutual funds as low-cost alternatives to regular plans has also attracted investors’ attention to mutual funds, he added.
On the regulatory front, Aadhaar-based verifications, UPI-based payments, introduction and simplification of new and existing mutual fund categories, transparency in net asset value (NAV) calculations have made the process simpler, giving the necessary push to the mutual fund industry.
“In 2020, the Reserve Bank of India (RBI) slashed interest rates on advances and deposits to inject liquidity into the economy. Also, with most people working from home and unable to step outside for leisure, expenses dropped, and savings increased. Hence, people had more disposable income with marginal returns being offered by bank deposits. Many people turned towards mutual funds to get better returns as a result,” Jain said.
In 2018, over 1.38 crore investor accounts were added, more than 1.36 crore in 2017, nearly 70 lakh in 2016 and close to 56 lakh in 2015.