In contrast to a significant rise in 2021, the growth in assets under management (AUM) for equities mutual funds has slowed in 2022 due to a very volatile equity market and investors increasingly profit-booking their profits.
In 2021, the AUM for equities mutual funds increased by 41%, from Rs 95,166 crore to Rs 1.33 lakh crore, according to data from the Association of Mutual Funds in India (AMFI). As AUM increased from Rs 1.4 lakh crore to Rs 1.56 lakh crore in 2022, the growth rate decreased to nearly one-fourth at 11%.
Financial consultants and analysts attribute the decline in growth in equity AUM to the higher degree of volatility in the Indian equity markets. “The year 2022 saw one of the steepest stock market crashes, with the BSE Sensex falling 2702 points on February 24 in the backdrop of the Russia-Ukraine war. The mark-to-market impact resulted in erosion of a huge chunk of investors’ wealth,” explained Jayesh Vithalani.
According to industry sources, big FIIs were unable to reinvest in the market due to the increased volatility.
In contrast, despite the uncertainty caused by the second wave of Covid-19 and its consequences, 2021 had great hope near the year’s close. “The equity markets touched a new peak in October 2021, and from a steep fall during Covid to a sharp rise, the net asset value of investments shot up significantly. The momentum of the equity markets continued in November and December as well, which translated into good growth,” said an Ahmedabad-based financial consultant.
Some analysts also attribute the rise in cases to a partial shift of investors towards the alternative asset classes. “As markets remained highly volatile during 2022, the market correction led to a major redemption by investors, who profit-booked their gains. Many small-cap and mid-cap entities, have done well. Many investors parked these gains in banks and reinvested in gold and silver. Some also turned to balanced funds,” said Kartik Patel, an Ahmedabad-based MF distributor.
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