Demonetisation: Mutual fund subscriptions shoot up

Average AUMs for October 2016: Rs 16.8 lakh crore, highest ever.

This is a five-fold increase in less than a decade.

AUMs doubled in last four years alone.

Total folios as on October 31, 2016 stood at 5.13 crore.

Mutual Fund (MF) investments have seen a steady rise since Prime Minister Narendra Modi began demonetisation drive last week. 

Reliance Mutual Fund has become the third private sector mutual fund company after HDFC and ICICI to cross Rs 2 lakh crore in assets under management (AUM) earlier this month. "Yes, we have crossed the Rs 2 lakh crore AUM mark on our daily AUM. However, this numbers will be reflected in the official data released by AMFI at the end of the quarter," said Sundeep Sikka, CEO, RelianceNippon Life Asset Managementwhile told PTI. 

Before PM Modi's demonetisation drive announcement last week, the number of MF folios rose to a record 5,1,287,934 as on October 30, 2016 an increase of 36.25 lakh. 

There are 43 fund houses in India. 

Mutual Fund advisors are expecting a a greater shift from physical assets (cash, real estate, gold) to financial assets (MF, deposits, others), in the medium term.

Janakiraman R, Vice President & Portfolio Manager, Franklin Templeton Investments, India, said that the demonetisation move is likely to reduce the role of the informal economy and will aid in improving overall business climate.

Manish Shah, Co-Founder & CEO, BigDecisions.com, said, "Just like e-commerce benefited from smartphone and credit/debit card ownership as much as from discounted pricing, mutual funds too will potentially benefit from this shift, even though it's an indirect one".

Romil Singhal, Founder and Director, Wealth Wisdom, said, "New set of investors like housewives & small business owners will be adding to the system".

Srikanth Meenakshi, Co-founder and COO, FundsIndia.com, said, "From viewing cash/material investments (currency/gold/real estate) as safe haven, investors may start seeing the benefits of market-linked, inflation-beating and highly liquid investments like mutual funds. The tax-free status on long-term gains from equity funds coupled with the benefit of being able to invest small sums, make mutual funds an ideal destination for people’s savings.

Commenting on how ban on high denomination currency will benefit the industry, Archit Gupta, Founder & CEO, ClearTax, said, "From a long-term perspective, since people will tend to keep less of their savings in cash, they will turn to mutual funds as an alternative. Given that mutual funds allow investments in smaller amounts, they could become preferred as a safer haven to park savings".

Moving forward, the experts predicts the fund size to grow further. 

Naveen Kukreja, CEO & Co-Founder, Paisabazaar, said, "With so much of hoarded cash coming back in the banking system, we expect interest rates to come down significantly in the next 6-9 months. With this in view, we feel that short-term and long-term income (debt) funds make a very attractive investment option for investors".