How did Mutual fund folios grow in March 2023?

14 Apr 2023 , 03:59 PM

After all, it is these folios (account numbers unique to an AMC) that give the real picture of expansion of retail interest in mutual funds. Obviously, growth in folios each month may not be too relevant. However, a longer perspective of folios across fund categories over one year can provide meaningful insights. Here we look at how the mutual fund folios for various categories of mutual funds panned out in March 2023 compared to March 2022.

MF Folios: Macro picture for March 2023

How does the macro picture of March 2023 mutual fund folios look across open-ended and close-ended funds?

Macro picture	Total Folios Mar-23	Total Folios Mar-22	Folio Growth
Open ended Funds	14,52,03,038	12,88,53,769	12.69%
Closed Ended and Interval Funds	5,27,562	6,50,883	-18.95%
Grand Total	14,57,30,600	12,95,04,652	12.53%

Data Source: AMFI 

At a macro level, the total number of mutual fund folios as of March 2023 stood at 14.57 trillion against 14.43 crore folios one-month ago. On a yoy basis over March 2022, total folios are up 12.53%. However, the growth has predominantly come from open-ended schemes while close-ended fund folios saw contraction in folios by -18.95%. That is not surprising considering that close-ended folios account for just about 0.3% of the total folios in India. The folios focus here would predominantly on the open ended funds only.

Debt fund folios shrink once again in March 2023?

Debt fund folios continued to be under pressure in March 2023 and the yoy comparison clearly shows that the number of folios has fallen over March 2022.

Macro picture	Total Folios Mar-23	Total Folios Mar-22	Folio Growth
Long Duration Fund	45,546	24,559	85.46%
Overnight Fund	6,28,550	5,60,319	12.18%
Ultra-Short Duration Fund	6,33,103	6,18,499	2.36%
Money Market Fund	4,22,082	4,16,283	1.39%
Liquid Fund	17,73,500	17,53,074	1.17%
Gilt Fund	1,76,253	1,78,641	-1.34%
Dynamic Bond Fund	2,29,940	2,33,672	-1.60%
Gilt Fund: 10-year CD	42,565	44,766	-4.92%
Corporate Bond Fund	6,17,379	6,61,554	-6.68%
Medium to Long Duration	1,06,926	1,15,666	-7.56%
Credit Risk Fund	2,46,438	2,71,688	-9.29%
Medium Duration Fund	2,56,052	2,82,861	-9.48%
Floater Fund	2,36,780	2,62,624	-9.84%
Banking and PSU Fund	2,97,318	3,31,836	-10.40%
Low Duration Fund	9,40,074	10,54,564	-10.86%
Short Duration Fund	5,07,214	5,76,126	-11.96%
Total of Debt Funds	71,59,720	73,86,732	-3.07%

Data Source: AMFI

Out of the 16 categories of debt funds available in India as per the AMFI classification, only 5 categories saw expansion in the number of folios, while the remaining 11 fund categories saw contraction in folios. Long duration fund folios grew by a surprising 85.5%, albeit on a small base. The message is that investors are willing to lock themselves into longer durations at higher yields. Overnight funds also attracted a lot of treasury interest with 12.18% growth in folios. The categories that saw the maximum shrinkage of folios were the discretionary debt fund categories like short duration funds, low duration funds and the banking & PSU funds; apart from floater funds. Overall, for the debt funds, number of folios yoy shrank by -3.07%; slightly better than the performance in February 2023.

Equity fund folios built up heft in March 2023

In contrast to debt funds, equity fund folios expanded sharply in March 2023 and the yoy comparison clearly shows that the number of folios grew sharply over March 2022.

Macro picture	Total Folios Mar-23	Total Folios Mar-22	Folio Growth
Small Cap Fund	1,08,99,311	78,70,459	38.48%
Multi Cap Fund	41,42,895	30,82,531	34.40%
Dividend Yield Fund	7,21,832	5,67,533	27.19%
Mid Cap Fund	1,06,12,983	87,05,192	21.92%
Large & Mid Cap Fund	78,09,179	67,29,990	16.04%
Value Fund/Contra Fund	46,66,901	40,22,810	16.01%
Sectoral/Thematic Funds	1,31,75,494	1,18,94,913	10.77%
ELSS Funds	1,52,72,141	1,38,96,408	9.90%
Flexi Cap Fund	1,27,01,619	1,16,48,458	9.04%
Focused Fund	53,15,932	50,67,076	4.91%
Large Cap Fund	1,29,73,512	1,24,44,858	4.25%
Total of Equity Funds	9,82,91,799	8,59,30,228	14.39%

Data Source: AMFI

All the 11 categories of equity funds as per the AMFI classification saw accretion in folios, which is like a 100% strike rate. Small cap funds topped the folios growth at 38.5%, largely on account of NFOs and alpha hunting. Oher growth stories in terms of equity fund folios were multi-cap funds at 34.4%, dividend yield funds at 27.19% (largely on SBI NFO) and mid-cap funds at 21.92%. This surge in folios in active equity funds can be attributed to a slew of NFOs as well as to the rapid growth in monthly SIP flows, which touched a record level of Rs14,276 crore in March 2023. Overall, for equity funds, number of folios yoy grew by 14.39%, lower than February 2023.

How hybrid fund folios expanded in March 2023?

Here we have combined hybrid funds with the solution-based funds to give a more complete picture. Folios have grown across categories, with the only exception being arbitrage funds, which saw contraction in folios, more due to treasury management.

Macro picture	Total Folios Mar-23	Total Folios Mar-22	Folio Growth
Multi Asset Allocation Fund	10,53,181	7,95,488	32.39%
Aggressive Hybrid Fund	53,17,925	50,50,651	5.29%
Dynamic Asset Allocation/BAF	44,47,644	42,45,466	4.76%
Conservative Hybrid Fund	5,19,049	5,04,505	2.88%
Retirement Fund	27,59,419	26,84,311	2.80%
Equity Savings Fund	3,61,815	3,54,715	2.00%
Childrens Fund	29,27,533	28,94,434	1.14%
Arbitrage Fund	4,45,949	4,99,685	-10.75%
Total of Hybrid Funds	1,78,32,515	1,70,29,255	4.72%

Data Source: AMFI

Out of the 8 categories of hybrid and solution-based funds available in India as per the AMFI classification, 7 categories saw expansion in the number of folios, with only arbitrage fund seeing contraction in folios. That is acceptable, arbitrage funds are a debt treasury product equivalent, despite being classified as a hybrid fund. Multi-asset allocation funds have been the star among hybrid funds in terms of folio accretion in March 2023 also. The 32.4% folio growth in multi-asset allocation funds can be attributed to the NFOs. All other categories saw single-digit growth in folios. The number of folios in arbitrage funds contracted -10.8% amidst volatile markets. Overall, for the hybrid and solution funds, number of folios yoy grew at a healthy clip of 4.72%, slightly lower than in February 2023.

Passive funds were the undisputed stars of March 2023?

Under passive category, we have included equity and debt related index products, apart from gold funds and Fund of Funds (FOF). The idea is to include fund categories where the intent is not alpha hunting but to mirror an index or an underlying asset class.

Macro picture	Total Folios Mar-23	Total Folios Mar-22	Folio Growth
Index Funds	38,53,245	24,69,089	56.06%
Other ETFs	1,20,64,198	1,05,41,730	14.44%
GOLD ETF	46,99,537	42,41,840	10.79%
Fund of funds investing overseas	13,02,024	12,54,895	3.76%
Total of Passive Funds	2,19,19,004	1,85,07,554	18.43%

Data Source: AMFI

Like in the case of equity funds, all the 4 categories of passive funds available in India, saw expansion in the number of folios. Passive funds have seen a slew of NFOs during the year and that has largely contributed to the folio expansion. Index funds, index ETFs and gold funds have seen a sharp spike in the number folios, although that has not translated into growth in AUM for gold funds. Passive fund folios grew 18.43% yoy in March 2023. 

Here is what the folios tell us. Investor interest is gravitating away from debt funds; especially treasury products or where there is too much fund manager discretion. Even within equity funds, the preference is for clean alpha funds like sectoral funds, small-cap, or mid-cap funds or for passive funds. For now, the folio story for March 2023 is that Indian mutual fund investors are willing to make a clear choice of whether they want to run with the hares or hunt with the hounds.