Mu. With the increasing dominance of the fund, it is necessary to maintain investor confidence

- The level of assets managed by funds in December was Rs. Crossing the 50 lakh crore mark, which is a remarkable achievement

The level of assets managed by mutual funds in India in December stood at Rs. 50 lakh crore was crossed, which is a remarkable achievement. There is no doubt that over time mutual funds have emerged as the most important institutional investors in the Indian capital market. Assets under management of the mutual fund industry have increased over the last 10 years from Rs 8.25 lakh crore as on March 31, 2014 to Rs 50.77 lakh crore as on December 31, 2023. The total number of investors in mutual funds increased from 88 lakh to 4.2 crore during this period.

Currently, assets managed by mutual funds have crossed the 25 percent level of total bank deposits, which means that they are increasingly dominating the country's financial sector. If we look at the scope of stock market development, both mutual funds and individual investors have emerged as important players. As of September 2023, they accounted for 8.7 and 9.7 percent of the total market capitalization of listed companies, respectively. Although foreign portfolio investors are still a significant market participant with a total share of 18.4 percent, it has declined from 22 percent 10 years ago. Equity schemes account for 43 percent of the total assets managed by mutual funds. 90 percent of them are owned by individual investors.

The mutual fund industry has been successful in building and maintaining trust and many investors choose to enter the market with them. In fact, mutual funds played an important role in the monetization of household savings in the country and converted savers into investors. The ease of e-KYC and the growth of digital platforms have helped expand the reach of mutual funds in semi-urban and rural areas. Necessary steps have been taken to increase transparency in this sector.

The role of Systematic Investment Plans (SIPs) in Mutual Funds has steadily increased and has led to a change in investing. SIP has now become a household name as people pay Rs. 500 can be invested. In FY2024, 31.5 lakh SIP accounts were added per month compared to just 6.3 lakh per month in FY2017. In December 2023, the total amount coming into SIPs stood at a record level of Rs 17,600 crore.

It may be noted that the investment culture in the country has received a significant boost in the post-Covid period. The number of enrollments in new demat accounts and mutual fund schemes has increased. Low interest rates on bank deposits during 2020-22 allowed even risk-averse people to explore the capital market. The Indian capital market has performed relatively well since 2020 and investor confidence remains intact. A growing investment culture also warns banks not to take people's deposits lightly. As a result, banks are now reacting quickly to market signals and changing their deposit rates from time to time.

Mutual funds have played an important role in adding depth to the Indian corporate bond market. They are the only domestic institutional investors who want to go into relatively low rate debt securities. A largely underdeveloped corporate bond market was responsible for the debt market crises of 2018 and 2020 and affected the credibility of debt mutual funds.The market regulator worked to strengthen regulatory oversight in consultation with other participants in the mutual fund industry. The steps required for this include:

Foreign portfolio investors play an important role in providing liquidity and depth to the country's capital market. However, a large portion of these investments may suddenly exit, leading to weakness in the Indian currency. Mutual funds and individual investors have increased participation over the years and this has helped stabilize the market to an extent. Despite the recent surge in inflows into mutual funds, their ratio of assets under management to GDP is just 18 percent. This ratio is 21 percent in China, 75 percent in United Kingdom and 149 percent in America.