While it may not be an easy money environment in 2022, some experts expect the impact of the Omicron version of the novel coronavirus to be not as severe as was seen in the first two waves of the pandemic.
CEO Suresh Soni said, “To a large extent, the world has learned to live with COVID and with rapid vaccination coverage in India, Omicron’s impact on the economy should not be as devastating as the previous waves have been.” of Baroda Mutual Fund.
He said that low interest rates, increasing awareness about mutual funds and good investment performance will be the contributing factors for the growth in assets under management (AUM) going forward.
Mutual fund industry’s AUM rises by 24 per cent to all-time high 38.45 lakh crore in 2021 till the end of November 31 lakh crore at the end of December 2020, showed data available with the Association of Mutual Funds in India (Amfi).
Vidya Bala, co-founder, primeinvestor.in, believes the final mutual fund AUM figure at the end of December may be slightly lower or flat, as the consolidation phase is currently underway.
Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said there could be some outflow from debt funds due to advance tax payments in December.
The AUM of the 45-member mutual fund industry had witnessed a relatively low growth rate of 17 per cent in 2020. Also, the year 2021 will mark the ninth consecutive annual increase in industry AUM after a decline in the two preceding years.
The number of investors is expected to increase by 2.65 crore during the year. In 2020, a little over 72 lakh folios were added.
While 2020 was a year that was marked with recovery in the stock market due to the uncertainties related to COVID and higher liquidity requirements of individuals and companies, experts believe that the negative impact of the pandemic in the year 2021 was less and The inflow has shown a spurt.
Swapnil Bhaskar, Head of Strategy, Neo (Neo-Banking Fintech for the Millennium) said that the primary reason for the impressive growth in the asset base is high liquidity in the market driven by a liberal monetary policy across the globe and increasing participation . Domestic retail investors.
In addition, asset management companies (AMCs) launched over 100 NFOs offering various investment ideas, leading to further increase in AUM, said Jimmy Patel, CEO, Quantum Mutual Fund.
Radhika Gupta, MD and CEO, Edelweiss Asset Management, said the increase in AUM has also benefited from mark-to-market as the industry has a significant share of equity.
Net inflow of Mutual Funds seen 1.93 lakh crore in 2021 (till November). Contains 71,600 crore in equity schemes and 14,500 crore in loan schemes.
As interest rates are falling, investors are looking for options beyond traditional methods. Moreover, increasing awareness about mutual funds has helped increase the participation of retail investors in the mutual fund industry, said A Balasubramaniam, President, Amfi.
Equity-oriented mutual fund schemes have seen a net inflow of 71,600 crore in the year, increased manifold from 9,410 crore of net inflows seen in 2020.
Equity schemes have been witnessing consistent net inflows since March 2021. Earlier, net outflow was observed in this range. 46,791 crore for eight consecutive months from July 2020 to February 2021.
Srivastava said the market fall at the start of the second wave of the pandemic was the trigger for investors to make a comeback in equity-oriented mutual funds.
“The immunization drive across the country and the easing of lockdown restrictions enabled the economy to rejuvenate and boost business, leading to a rally in the stock market. The repo rate was slashed to a historic low in May 2020 And has remained unchanged since then. “Promoting investors to believe in equity instruments as well,” said Preeti Rathi Gupta, Founder, LXME.
Pleasantly, the markets have continued their upward move since March, thus boosting investor sentiment. This prompted investors to invest more instead of missing out on opportunities.
Besides this, rising equity market and weak returns in avenues of traditional investments like bank FDs (fixed deposits) and real estate are other factors attracting investors to equities, said Patel of Quantum Mutual Fund.
In 2022, Bala of Primeinvestor.in said that the inflow in equities will be entirely driven by whether the market will rally or not. Any correction could trigger outflows, so the call would be to watch the movement of interest rates, the global outcome from that and its impact on the Indian markets.
“There are a few factors that could impact near-term flows for equities. One of the key factors will be how the Covid scenario progresses with respect to the Omicron version of the coronavirus. Third wave of the pandemic, if it happens on Morningstar India. “There may be another issue and some profit-booking may start,” Srivastava said.
He added that barring a few temporary hiccups, investor interest in equity-oriented mutual funds is unlikely to dip.
SIPs or Systematic Investment Plans, which have been the bedrock of mutual fund inflows for many years, have seen a collection 1.03 lakh crore, much more 97,000 crores were raised in 2020.
Monthly contribution from SIP increased Record high of Rs 8,023 crore in January 11,005 crore in November.
Statistics show that investors are gradually starting to understand the concept of disciplined investing which can be achieved through SIP.
AMFI’s Balasubramaniam believes that investors will continue to invest through SIPs given the simplicity, convenience and attractive performance over the long term.
On the other hand, debt funds, which are often considered a safe bet, were not the highlight of the year as investors, anticipating interest rate risk, looked for other avenues. This section saw the net flow of 14,500 crore in 2021.
Bala said 2022 could be the year to enter debt if the prospects of a hike in interest rates increase.
with a net inflow of more 4,500 crore in 2021, Gold Exchange Traded Funds (ETFs) continued to attract investor attention throughout the year and that too when equity markets picked up momentum. This suggests investors to prefer the yellow metal as a part of their investment portfolio.
Gold with its outstanding performance over the years has attracted significant interest from investors and the steady growth in their folio numbers is a testimony to the same.
This year, the folio count in gold ETFs has increased from 8.87 lakh in December 2020 to 29.3 lakh in November 2021.
In 2022, the category should see sustained interest amid stagnant inflation and the Federal Reserve attempting to catch it, potentially disrupting growth and markets,” said Patel of Quantum MF
“That said, a tightening of monetary policy by the Fed will support dollar and US yields, which will be a headwind for gold. Conflicting forces will keep gold in a consolidation mode for some time making it a safe haven for investors. Would be conducive to do,” he added.
During the year, markets regulator SEBI has taken several steps for the industry, including a two-tier benchmarking scheme for mutual fund schemes, introduction of silver ETFs and disclosure process for mutual fund schemes with ESG (Environmental Sustainability). and governance) subject.
Industry experts believe that these measures will bring in more transparency, which will help in instilling more confidence in investors towards mutual funds and making investment decisions.
However, one circular that can be debated is SEBI’s framework on aligning the interests of key employees of AMCs with that of unitholders of mutual fund schemes.
Patel said this framework takes away the freedom of financial planning as well as creates a huge imbalance in the cash flow planning done so far.
“Every mutual fund offering comes with risk disclosure – and the ‘skin in the game’ is not a proven way for the investor to reduce risk or increase the certainty of an improved outcome. This will seriously affect the ability to attract and Keep the talent of small AMCs intact.”
Neo K Bhaskar said that some new mutual fund companies may come in the market in the new year and such companies will focus on filling the gap in the market by introducing new products.
“We expect global diversification and passive investment to remain emerging and sustainable trends,” he said.
This story has been published without modification in text from a wire agency feed.
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