Drivers of equity MFs need close monitoring: RBI
August 29, 2025
RBI Bulletin highlights the growing importance of equity MFs in household savings, urging investor education and risk management.
In an evolving scenario, keeping a close eye on the drivers of equity MFs may be necessary, as they have implications for household savings and the changing dynamics of domestic capital markets. Increasing retail participation also warrants more efforts toward investor education and protection to maintain the faith and trust of these new entrants, said the RBI Bulletin.
As MFs grow in size, a constant monitoring of risks emanating from their operations would need greater attention, it added.
The share of MFs in the household sector’s gross financial savings increased to 6 per cent in FY’23 from 0.9 per cent in FY12.
Despite a traditionally cautious approach to financial markets, the populace has shown a discernible inclination to embrace greater financial risk in their personal investment choices in recent years.
Equity tilt
Assets under management of the MF industry registered a compounded annual growth rate of 17 per cent to ₹66 lakh crore in March from ₹6 lakh crore in March 2010.
The AUM of women investors in MFs in India more than doubled from ₹5 lakh crore in March 2019 to ₹11 lakh crore in March 2024.
Monthly flow through systematic investment plans has been recording fresh lifetime highs, crossing the ₹27,000 crore mark in June, despite heightened volatility in Indian equity markets in the recent period due to geopolitical developments and trade related uncertainties.
The tilt of retail investors towards equities is also reflected in the fact that around two-thirds of all MF accounts are focused on equity-oriented assets.
Heightened risk
The market value of small and midcap stocks held by MFs stood at about ₹14 lakh crore in March, accounting for more than one-fourth of the equity holdings of MFs.
Given relatively low liquidity in the Small and Midcap segments, MFs could be subject to large liquidity risks from redemption pressures in case of sharp downward adjustments, which could then put pressure on other segments of the financial markets.
To protect investor interest of small and midcap funds, SEBI has regularised liquidity stress tests for these equity schemes, an exercise already conducted regularly for debt schemes.
MFs are emerging as a potential competitor to bank deposits, especially among the aspirational middle class in India.
The ratio of AUM of the MF industry to total deposits has more than doubled from about 10 per cent in March 2014 to 24 per cent in March 2024.
Published on August 29, 2025
As MFs grow in size, a constant monitoring of risks emanating from their operations would need greater attention, it added.
The share of MFs in the household sector’s gross financial savings increased to 6 per cent in FY’23 from 0.9 per cent in FY12.
Despite a traditionally cautious approach to financial markets, the populace has shown a discernible inclination to embrace greater financial risk in their personal investment choices in recent years.
Equity tilt
Assets under management of the MF industry registered a compounded annual growth rate of 17 per cent to ₹66 lakh crore in March from ₹6 lakh crore in March 2010.
The AUM of women investors in MFs in India more than doubled from ₹5 lakh crore in March 2019 to ₹11 lakh crore in March 2024.
Monthly flow through systematic investment plans has been recording fresh lifetime highs, crossing the ₹27,000 crore mark in June, despite heightened volatility in Indian equity markets in the recent period due to geopolitical developments and trade related uncertainties.
The tilt of retail investors towards equities is also reflected in the fact that around two-thirds of all MF accounts are focused on equity-oriented assets.
Heightened risk
The market value of small and midcap stocks held by MFs stood at about ₹14 lakh crore in March, accounting for more than one-fourth of the equity holdings of MFs.
Given relatively low liquidity in the Small and Midcap segments, MFs could be subject to large liquidity risks from redemption pressures in case of sharp downward adjustments, which could then put pressure on other segments of the financial markets.
To protect investor interest of small and midcap funds, SEBI has regularised liquidity stress tests for these equity schemes, an exercise already conducted regularly for debt schemes.
MFs are emerging as a potential competitor to bank deposits, especially among the aspirational middle class in India.
The ratio of AUM of the MF industry to total deposits has more than doubled from about 10 per cent in March 2014 to 24 per cent in March 2024.
Published on August 29, 2025