AMFI data: How retail mutual fund investors thinkAccording to Association of Mutual Funds in India (AMFI), there were 6.70 crore retail investor accounts (folios) in mutual funds. This does not indicate the presence of 6.70 crore retail investors because many investors hold multiple accounts or folios. Other estimates put the total number of mutual fund investors in India at about 2 crore. There are also about 39 lakh HNI (High Net-Worth Individual) accounts and about 4 lakh institutional accounts.

Cyclical Interest

According to AMFI, the total number of investor accounts was 4.76 crore in March 2009. From that time till March 2014, the number of accounts steadily dropped, hitting a low of 3.95 crore in March 2014. The 2009-14 period was a time of relative stagnation in the equity market causing a large-scale exit by retail investors.

The equity market entered a new bull phase from mid-2014. This is reflected in retail investor accounts which soared from 3.95 crore in mid-2014 to 5.54 crore in March 2017 to 7.13 crore at the end of March 2018. Equity accounts or folios grew much faster than debt ones.

Average Ticket Size

The average ticket size in equity schemes is Rs 1.55 lakh because this category is dominated by retail investors. The average ticket size soars to 8.28 lakh for debt funds and hits a whopping 30.6 lakh for liquid funds.

Another way of looking at this data is category-by-category. In this type of analysis, if we look at only retail investors, the average ticket size is Rs 79,019. HNIs held 16.35 lakh per account and Institutions held 9.28 crore per account.

How long do they remain invested?

This is a key behavioural question and a major determinant of the ultimate returns that retail investors get. According to AMFI data, just 30% of equity assets are held for longer than 24 months.

About 50% of equity assets are held for less than a year and the balance 20% is held for 1-2 years. This is a sad state of affairs. Equity is a long-term asset and delivers its best returns over holding periods of five years or more.

In case of debt, about 60% of assets are held for less than a year. However, this is not a particularly negative data point. Debt funds include liquid and ultra short-term funds which are geared towards holding periods of one year or less. Also, longer time horizons should encourage investors to move into equity.

However, according to AMFI, the higher period for long-term capital gains tax in debt compared to equity (3 years vs 1 year) has caused a shift towards a longer holding period in debt.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.