Money9 Edit | Inflows in MF space a bright spot in the gloom

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Future researchers would look back at this period and observe that one bright spot in the overall COVID gloom in India was the indomitable spirit of the investors in stock markets and mutual funds. The figures of the mutual fund industry released on Tuesday is another confirmation of this trend. After suffering net outflows for a few months, the mutual fund sector witnessed positive inflows for April, the second month running.

The number, Rs 3,437 crore, is not astronomical, but the direction of movement is significant. For first-time retail investors, the mutual fund industry is the ideal stepping-stone towards investing in the stock markets, since MF offers a sort of safety net for new investors who want to taste the returns of a stock market without exposing themselves to the complexities and risks associated with the markets.

In COVID-ravaged FY21, the Indian MF sector added 81 lakh accounts of investors pushing the total investors in this segment to 9.78 crores. In FY20, the industry enlisted 72.89 lakh entrants. In fact, every year since FY16, the mutual fund industry has attracted a huge number of debutants. In FY16, the number was 59 lakh which rose to 67 lakh in FY17. There was a boom in the next two years when as many as 1.6 crores new investors put their money into mutual funds in FY18 and 1.13 crore first-timers entered the market in FY19. 

It is heartening to see the total number of investors in the MF space move towards 10 crores. Swelling of the ranks leads to democratisation of the financial markets which is so crucial for the sake of robustness of the ecosystem. With interest rates dipping and guaranteed-return schemes offering declining returns, a robust mutual fund market will only help an increasing number of people realise better value for their investments.