The May 2022 data published by the Association of Mutual Funds of India (AMFI) made for a sobering read. The total average assets under management (AAUM) of the industry has come down from Rs 38,90,000 crore ($498 billion) in April to Rs 37,40,000 crore ($479 billion) in May. The market downturn, combined with rising interest rates and falling equity values, has taken a toll on the industry, impacting both portfolio values and fund flows. In fact, the May AAUM was at a nine-month low. 

On the bright side, though, equity mutual funds equity mutual funds Equity mutual funds Mutual fund schemes that invest money in stocks of companies —a key subset of the total AAUM—continued to witness positive inflows for the 15th straight month. Also, the contribution of monthly systematic investment plans (SIP) to the AAUM in May—at Rs 12,300 crore ($1.6 billion)—was near its all-time high in March.

May’s dichotomy is a microcosm of India’s mutual fund industry over the past few years. The old—debt investments, institutional investors, regular plans—is ceding ground, slowly but surely, to the new—equity investments and exchange-traded funds (ETFs) exchange-traded funds (ETFs) Exchange-traded funds (ETFs) A basket of securities that tracks an underlying index and trades on the stock exchanges , individual investors and direct plans. 

Mutual fund investing is also no longer the preserve of those in the top cities in the country. Nor are they the fiefdom of the top fund houses by AUM; some of the newer, smaller funds are chipping away at the edifice with innovation and superior returns. We analysed AMFI data between May 2015 and May 2022 to find out what has changed, why, and what this means for the mutual fund industry and investors.

Rocket ride

 The iffy market conditions since late 2021 have been causing a see-saw in the mutual fund industry’s AUM. But take a long-term bird’s eye view, and you can see that mutual funds have been riding on a rocket. 

Consider these numbers. The industry surpassed the milestone of Rs 10,00,000 crore ($128 billion) AUM eight years ago in May 2014. And then, within a year, its AUM crossed Rs 12,00,000 crore ($154 billion), and since then, it has more than tripled to breach the Rs 37,00,000 crore ($474 billion) mark.

Interestingly, the highest AUM growth came after periods of great economic disruption in the country—the Indian government’s demonetisation demonetisation Demonetisation Stripping a currency unit of its status as legal tender.