Mutual Funds in the Post Pandemic World

It will not be an understatement to say that Covid-19 was a turning point for the economy and markets. A lot has changed since markets tanked ferociously following the declaration of COVID-19 as a pandemic by the World Health Organization (WHO). Both the Sensex and Nifty have scaled new peaks. There has been a major shift in the mutual fund industry during the pandemic, which has seen massive inflows. Read on to learn how mutual funds have performed in the post-pandemic world.

Evolution of Mutual Funds in the Post-Pandemic World

Growing Preference for Mutual Funds

Post-pandemic, there has been a shift in investors’ preferences from traditional investments to mutual funds. During the pandemic, when interest rates were low, retail and corporate investors poured more money into mutual funds. Data from SEBI shows that most households channelled funds into equity schemes in 2022-23.

Mutual funds invested Rs 1.73 trillion in equity markets in FY 23. This accounted for 97% of net household flows into mutual funds. This shows the growing popularity of mutual funds in the post-pandemic world.

Spike in SIP Contribution

Systematic investment plans, or SIPs, as they are commonly known, have captivated the imagination of investors. The increasing number of SIP contributions to mutual funds is a testament to their growing popularity among investors.

SIPs allow you to invest specific money at predetermined intervals in your chosen funds. They help build disciplined savings habits and give you the advantage of rupee cost averaging. The table given below shows SIP contribution in mutual funds across FY 21, FY 22, and FY 23:

There has been a significant jump in SIP contribution in mutual funds, which shows their popularity and the preferred investment vehicle among investors. The Indian mutual fund industry currently has 7.44 crore SIP accounts through which investors invest in various schemes.

Increase in AUM of Mutual Funds

There has been a significant growth in the assets under management (AUM) of mutual funds between March 2020 and March 2023. During this period, the AUM of mutual funds grew 77% from Rs 22.26 trillion to Rs 39.42 trillion. While a buoyant recovery of markets was the primary catalyst, fresh flows into mutual funds also contributed to this growth.

Another exciting development is the growth in AUM of passive funds during the period between March 2020 and March 2023. AUM of passive funds has recorded a growth of 322% during the post-Covid period.

This shows investors are embracing passive funds and making them a part of their portfolio. Unlike active funds, the primary objective of passive funds is to mimic the index they’re tracking and hold securities in the same proportion as the index.

Summing it Up

The numbers stack in favour of mutual funds in the post-pandemic world. Offering professional management and diversification, they have made deep inroads and are expected to continue their rise in investors’ preference ladder in the coming days.