Indian mutual funds hit a new high

 

-Dr. Virendra Tatake

Mutual fund investments and mutual fund assets increased significantly in the fiscal year 2020-21, and this trend is likely to remain the same in the present year also.  There are two important reasons behind this growth. The first reason is the surge in the Indian stock market over the past year! The rise in the market value of the shares of the majority of companies in the stock market was reflected in the assets of mutual funds. The Sensex, which had plummeted to the level of 28,000 in March 2020, touched 51,000 in May 2021 in just 14 months. The second reason is that a large number of new investors have been added to mutual fund investments over the past year.

The trend of investing in Systematic Investment Plan (SIP) has also increased in the last one year. According to the data released by AMFI (Association of Mutual Funds in India), in the financial year 2020-21, one crore forty-one lakh new SIP accounts were opened through which a whopping Rs 96,000 crore was invested in various mutual fund schemes.

This trend continued in the present financial year also and an approx.  Rs 8,600 crore was invested through about 14 lakh new SIP accounts opened in the month of April 2021. As a result of this influx of investment, the total assets of mutual funds in the country have recently crossed the Rs 32 lakh crore mark.

From March 2020 to May 2021, the NAV of most mutual funds seems to have been graphed with the English letter V, which has benefited SIP investors starting during this period.

A simple example will show that the Sensex, which touched the level of 40,000 in March 2020, then collapsed to 28,000 and then rose again to reach the level of 51,000 in May 2021. During this period, those who had done SIPs in Sensex-based index funds got better returns. A similar picture has been seen in the majority of mutual fund schemes over the past year

What's next?

Experts are predicting that the bullish bubble created by the market will burst as the Sensex and Nifty have reached near-peak levels. Mutual fund SIP investors should take this as an opportunity to continue their SIP investment and if possible, start another new SIP. Of course, the duration of SIP should be long term. Even if the market collapses as expected, when it recovers in the future, the NAV graph of mutual funds from March 2020 will look like the letter W. It will benefit investors who have started SIP investments during this period. Such a pair of SIPs can be doubly profitable if they are prepared to make a lump sum investment in the same fund after the market collapses. If the market does not collapse due to miscalculations by experts, the current SIP will benefit.

Thus, given the fact that long-term SIP investment pays off, no matter what the market conditions, it is likely that Indian mutual funds will continue to fly in the millions.

 

(The author is associated with Indira Global Business School as a Director)

 

 

(Kindly refer this link for Marathi translation of the article by the author:

https://www.esakal.com/arthavishwa/smart-investment-mutual-fund-benefits-by-virendra-tatake