MFs add 53 lakh folios in FY'16; small cities' share on rise

New Delhi: Gaining traction, the number of mutual fund investor accounts in the current fiscal have grown by over 53 lakh, with almost half of them coming from smaller towns.

Besides, regulator Sebi has initiated discussions with various e-commerce players to expand the distributor network for mutual funds, which it expects can result in a multi-fold surge in the number of investors for this instrument.

Overall, mutual funds witnessed an addition of 53 lakh investors account in the current fiscal, taking the total number of folios to 4.7 crore.

For a long time, investors accounts were not going beyond 2 crore.

Out of 53 lakh folios added this financial year, 25 lakh are from towns beyond top-15 cities.

Growing participation from retail investors, especially from small towns, huge inflow in equity schemes and several measures taken by Sebi has led to sharp increase in folios, Sebi Chairman U K Sinha said over the weekend after the board meeting.

The regulator has given extra incentives for those expanding into smaller cities.

Mutual funds have reported net inflows of Rs 75,000 crore in equities in the current financial year, much higher than Rs 71,000 crore witnessed in the preceding fiscal. Interestingly, smaller towns have contributed 44 per cent of such inflows.

However, Foreign Portfolio Investors (FPIs) have pulled out more than Rs 27,000 crore from the stock markets in the current fiscal.

This indicate that mutual funds are emerging as a new and very strong counterbalance to FPIs.

The regulator further plans to increase the mutual funds investors' base and it is in talks with several e-commerce companies to expand the distributor network.

"We are also talking to a number of e-commerce companies and others who are willing to be a distributor for mutual funds. Our expectation is that if this comes through, the numbers can go up 5-7 times," Sinha said.

"For the end investors, the KYC issue would be resolved after the new bill. That will be a game changer," he added.

Sinha also said Sebi prefers retail investors coming to the markets through mutual funds, rather than coming in directly without the informed advice of a registered entity.