2021 ends on a positive note for Mutual Funds, here’s why

On Monday, January 10, 2022, the Association of Mutual Funds of India (AMFI) came out with the data which stated the increased interest of retail investors in the last month of 2021. When the stock markets were correcting, the retail investors infused more money. The scare of the omicron variant failed to affect retail enthusiasm.

As per the numbers issued by AMFI, total sum infused into equity-based mutual funds in the month of December was Rs. 25,077 Crores. This figure has doubled the previous month’s investment. In November 2021, the total sum invested in equity-based mutual funds was Rs. 11,615 Crores.

SIP Data

During December 2021, systematic investment plans (SIPs) became the most preferred method of investing for the retail pack. Half of the total sum infused in mutual funds was via SIPs. Out of Rs. 25,077 Crores, Rs. 11,305 Crores came from the systematic investment plans.

The numbers detail out how the SIPs performed in the last two months of 2021. In November 2021, the SIP amount stood at Rs. 11,005 Crores. This was an all-time high until November. However, this figure was crossed and in December, SIPs infusion of money made another all-time high of Rs. 11,305 Crores.

As per the data published by AMFI, the total number of SIP accounts was reported at 4,90,78,500 as of December 2021. The numbers portray increased retail participation in the stock market.

Mutual Fund Industry

Despite the volatility in the markets, the year 2021 turned out to be an overall positive year for the mutual fund industry. The total asset under management (AUM) of this industry went up by 26% compared with the previous calendar year 2020.

In December 2020, the AUM was about Rs. 31 Lakh Crores whereas, as of December 2021, the AUM stood at Rs. 37.7 Lakh Crores. This increment was mainly backed by retail participation.

The open-ended mutual fund schemes have four categories, viz. (i) Growth schemes (equity-based), (ii) Hybrid schemes (Debt + Equity), (iii) Solution-focused schemes, (iv) Other schemes like Index funds, ETFs, etc. All these categories have seen positive growth in December 2021.

However, there was some outflow in the mutual funds which are purely debt-based. These income-based funds give steady returns and bear low risk. Retail investors have withdrawn about Rs. 49,150 Crores from this category of schemes.

Calendar Year 2021 for the Mutual Funds

2021 was a memorable year for the mutual fund industry, with record-breaking inflows via SIPs and ongoing investments in the existing schemes. Year-end flows witnessed a remarkable growth in mutual funds.

The rise of SIP accounts has been widely attributed to the steady and disciplined investing style of the common man.

FAQs

When and why was the AMFI formed?

AMFI, the Association of Mutual Funds of India, was formed 27 years ago, in 1995. This regulatory body is a division of SEBI and the Ministry of Finance that regulates mutual funds in India. It was formed with the intent of developing the mutual funds industry in India.

What are SIPs?

A systematic investment plan, also known as a SIP, is a type of investment plan that enables you to save and invest in a variety of mutual funds. A SIP is a recurring payment that’s taken from your bank account. It’s usually linked to a specific mutual fund.

What is the difference between a growth fund and an income fund?

The growth funds are based on equity whereas income funds are based on debt. As equity is considered a riskier asset class compared to debt, the growth funds bear high risk but at the same time provide higher returns. On the other hand, the income funds provide fixed returns but are safer than the growth funds.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.