Market Volatility: Inflow of new investors to mutual funds slowed down

Mumbai: The country's mutual fund industry has not been spared from the impact of high volatility in the equity market in the last one and a half years. Decline in the number of new investors is becoming a challenge for the industry as mutual funds are making efforts to increase business in the country.

A total of 3.7 lakh new investors have been added to the mutual funds industry in the first 11 months of the current financial year, as against one crore added in the first 11 months of the previous financial year.

New investors are identified by the industry based on Permanent Account Number (PAN), industry sources said.

Inflow of new investors has slowed down due to weakness in short-term performance of equity schemes. Investors tend to join the scheme by looking at its performance.

Looking at the performance of equity mutual fund schemes in the current financial year, it appears that 50 per cent schemes have given negative returns to investors, while around 20 per cent schemes have provided returns of more than five per cent, the sources added.

Equity schemes have underperformed due to poor performance of stock markets. In the last 18 months, the country's two major stock market indices Nifty50 and Sensex have seen a decline of 2.60 percent and 1.60 percent.

With the increase in interest rates, investors especially retail investors are choosing to invest in fixed income instruments.