In the last decade, mutual funds witnessed explosive growth in the country. Top mutual fund companies like SBI Mutual Fund, HDFC Mutual Fund, ICICI mutual fund, Aditya Birla, Nippon, Kotak witnessed exponential growth in assets under management with lakhs of crore rupees at their disposal.
However, in the last few years, especially after the Coronavirus pandemic, almost all mutual fund companies have witnessed a steady decline in assets under management.
The SIP flows to the mutual funds have consistently declined in the last few months, and compared to March, it is down by almost 15 percent.
However, the decline in SIP flow does not mean that people are not interested in the stock market. In fact, the retail investment in the stock markets is at an all-time high and the inflows have grown exponentially in the last few months.
Moreover, in the last few months, the number of Demat accounts – accounts used for trading in stocks – has grown at an explosive rate. In FY 11, there was less than 2 crore Demat accounts in the country and the number barely grew till FY 17 when there were less than 3 crore accounts. However, between FY 17 to FY 21, the number grew to reach above 5 crores with more than 1 crore accounts opened between April to December of the last financial year alone.
So, what does the decline in investment in mutual funds but the rise in investment in the stock market signifies? The people trust themselves with their money.
The Internet has made Demat accounts accessible to everyone with e-KYC, e-sign, and e-verification with the help of Aadhar. Brokerage firms like Zerodha and Angel Investment have witnessed explosive growth in the number of retail traders registered with their firm. During the pandemic, people have had a lot of free time and good savings – for the people did not lose their jobs – and they decided to open an account with brokerage firms and trade themselves.
“The most common reasons have been people having more disposable income, as well as free time to trade as most of them, were working from home. Markets were volatile and at low points during the start of FY21 because of which first-time investors and millennials have been grabbing the opportunity for short-term gains and an alternative source of income,” said Ajay Menon, chief executive, broking and distribution, Motilal Oswal Financial Services.
This also shows that people trust themselves with their money if given a chance rather than ‘expert’ money managers. In the coming years, the number of retail investors will only rise because the new generation will trade easily with the help of the Internet.