Prof. K S Chandrasekar
vc@clujammu.ac.in
According to PIB, India is among the world’s fastest-growing major economies and is well-positioned to sustain this momentum. India would reach high middle-income status by 2047- the centenary year of its independence- the country is building on strong foundations of economic growth, structural reforms, and social progress thereby ensuring Vikasit Bharat. As per IMF’s World Economic Outlook Report of April 2025, India with a GDP of USD 4.18 had surpassed Japan to become the world’s fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years with projected GDP of USD 7.3 trillion by 2030. The GDP is expanding to a six-quarter high in the second quarter of 2025-26, reflecting India’s resilience amid persistent global trade uncertainties. Domestic drivers-led by robust private consumption-played a central role in supporting this expansion. inflation remains below the lower tolerance threshold, unemployment is on a declining trajectory, and export performance continues to improve. It may be noted that financial conditions have stayed positive, with strong credit flows to the commercial sector, while demand conditions remain firm, supported by a further endurance of urban consumption.
The unprecedented growth of the nation has been attributed to its global offshoring, digitization and energy transition practices. The world investment report indicates that India received nearly 81 billion USD in foreign direct investment during 2024-25, which is the fifth largest inflow in the world augmenting the star position of India in the global investment landscape. Indian stock market is the fifth largest equity market in the world and the market capitalisation of listed companies on the NSE surpassed USD 5 trillion (Rs. 416.57 trillion) recently. The foreign portfolio investors have also basked in the fair share of the prevailing optimism by increasing their holdings in the Indian market. In the domestic front, the indigenous investors have witnessed the rally of the market and supported the same by dramatically opening nearly 10 lakh DEMAT accounts every month post Covid. 175 million DEMAT account as of September 2024. India has around 90 million to 100 million unique investors. Roughly 15-20 million unique holders might have over Rs.10 lakh. This is about 15-20% of the 90-100 million unique holders. Just 20 million or 2 Crore investors are worth more than Rs.10 lakhs. For its part, the mutual funds witnessed a drum roll performance by registering an inflow of INR 12,500 Crores on an average per month through the SIP option bringing the overall AUM under SIP to 6.64 lakh Crores (Jan, 2023).
The Indian mutual fund industry saw robust growth in the 2024-25 fiscal year, marked by a substantial rise in unique investors (21.7%) and folios (32%), strong SIP growth (especially small ticket sizes), and surging Assets Under Management (AUM) crossing Rs 68 lakh Crore by late 2024. The Indian mutual fund industry has witnessed a dramatic growth due to the varied factors. People are starting to save and invest much early in their career and vying for opportunities to gain superior returns. Mutual funds gained traction primarily when it was difficult during the 90s and 2000’s that higher units needed to be purchased in equity markets which made mutual funds attractive and there is a fund manager for the same.
The target population of this product is sliced based on geographies into Top 30 (T-30) cities as the primary tier and beyond these top 30 cities (B-30) as the secondary tier. A 2019 study indicates that Mumbai and Delhi from among the T-30 cities contribute to nearly 50 % of the overall sales. The High Net worth Individuals (HNI) is another rapidly growing customer segment in the country with wealth holdings in excess of USD 3 trillion. The growing population of Indian middle class with a strong penchant for savings, the ebullient growth witnessed in the country’s GDP and a stable and supportive government is championing the cause of growth of this industry. Jammu and Kashmir is yet to wake up to this idea.
After SEBI introduced a slew of measures to ensure transparency, security and boost investor confidence in the schemes offered in the industry, mutual funds became more attractive. The savings propensity of the individuals which stands at 20% of the GDP is a vital factor that influences parking money in suitable investment vehicles. There is a strategic shift observed in the savings pattern among households from tangible assets viz., Gold, Real estate to financial assets. Now with Gold and Silver becoming costly, investors are turning to mutual funds as such. From a portfolio perspective, a larger portion of the pie is being allocated from traditional products like bank deposits and post office schemes to mutual funds and insurance products. Financial literacy needs to be carried out by SEBI on an urgent footing. The RBI census reveals that only up to 27% of the Indian adults meet the minimum requirements of financial literacy. To instill financial literacy from the early years, SEBI introduced Tarun Yojana at the school level integrating financial literacy into the curriculum, enabling young minds to gain a foundational knowledge about savings and investments.
Mutual Funds Sahi Hai campaign in the year 2017 in order to disseminate product knowledge and ensure wider participation from the diverse segments of the society made people to focus on mutual funds. This significantly changed the perception of people towards investment products and helped them plan their portfolios over and beyond the traditional products. The introduction of Chhoti SIP with a ticket size of Rs 250 enabled accessibility to the first-time investors and the underserved segments in the society. SEBI has advised the inclusion of riskometer info graphics in the product brochure for helping the generic investor understand the assumed risk. Consolidated account statement provision and 13 facilities to trade through a common utility portal has been initiated to support ease of handling MF transactions. The customer onboarding process is one of the most complex client facing activities in the financial sector, involving extensive documentation and adherence to regulatory requirements in the form of KYC (Know your customer), AML (Anti Money Laundering) and other mandatory legal formalities necessitating cross validations, approvals and signatures.
An eKYC program that facilitates completion of the KYC process digitally with OTP based Aadhaar number authentication has been rolled out to streamline the customer onboarding process. Additionally, Account maintenance activities and other KYC updates can also be conveniently executed through the eKYC platform through an efficient and single touch point experience. Digital payments such as UPI/ Digital wallets like BHIM, Phonepay, Paytm etc., have revolutionized the mutual fund industry. An AMFI-CRISIL study found that digital payments via debit cards, IMPS, and mobile banking increased to Rs 1767 Crore by September 2024. Post-COVID, UPI transactions have surged, reducing reliance on traditional card-based payments and contributing to increased SIP and lump-sum mutual fund investments. A new initiative from SEBI called MITRA, or Mutual Fund Investment Tracing and Retrieval Assistant, aims to help MF investors and their legal heirs find and retrieve dormant or forgotten mutual fund assets while also guaranteeing the legitimate ownership of the asset. Various studies of mutual fund investments shows that age influences the investment objective, risk propensity and investment style of individuals. Salaried Households were inclined towards investments with a longer tenure for safe gains while the business class expressed interest in making short term investments. Household income was found to carry a direct bearing on the risk taking ability of individuals and Jammu & Kashmir is no exception. The profile of the investors has a profound influence on the attitude towards mutual fund investing. However, ultimately how much a person wants to save from his monthly emoluments decides the fate of mutual funds or equity investments. As is said in finance parlance, higher the risk better the returns.
(The author is Vice Chancellor, Cluster University of Jammu)
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