10 crore mutual fund investors, Rs 150 lakh crore AUM: Inside AMFI’s massive 2030 roadmap

SIP numbers have been robust despite all the ups and downs we saw in the last few months. Even FII outflows haven’t been able to scare retail investors. Do you sometimes get surprised by domestic investing behaviour?

V N Chalasani: Not at all. There is a structural shift in how savers are investing their discretionary income. We have been successful in driving this shift through the Mutual Fund Sahi Hai campaign, along with our digital campaigns. We continuously educate investors and ensure they invest towards long-term goal achievement.

People see that small amounts are being debited from their accounts every month and going into SIPs. We communicate to them that when markets are down, there is a possibility of acquiring more units — similar to buying during a discount sale. In the US and across the globe, when there’s a discount sale, people rush to buy more goods rather than exit. That is what is happening here too.

There is a small but real behavioural change. Discretionary savings, which earlier went only into non-financial savings or bank deposits, are now being diversified — with mutual funds taking a major share.

COVID also taught us a lesson. People who stayed invested look back and see that their long-term returns were far better than what short-term noise would have suggested.

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Growth is increasingly coming from B-30 cities. What trends are you seeing in terms of broadening the investor base in India?

V N Chalasani: Spreading to B-30 cities is something we are constantly working on — the regulator, AMFI, and the AMCs together. The most important recent development is the regulator’s new incentivisation scheme, where the commission paid for new investors from B-30 cities is higher — 1% subject to a maximum of ₹2,000. That’s on the incentivisation side.

Beyond that, AMCs have brought SIPs down to as low as ₹100. And importantly, while we tend to think in monthly terms — EMIs, monthly salaries, monthly instalments — a large portion of our working population are daily earners. So we’ve also seen daily SIPs come in.

The shift from T-30 to B-30 is not just because of SEBI’s incentivisation. Financial literacy is spreading too. We have adopted certain states where we are running extensive training programmes across districts, schools, and colleges. We are conducting regional programmes and communicating in regional languages, not just English and Hindi.

More than 55% of SIP accounts are now from B-30 cities. Around 40% of the monthly SIP contribution is coming from B-30 cities. That is a marked shift.

While gross SIP inflows look spectacular, the SIP stoppage ratio often tells a different story. What is the current healthy equilibrium, and how is AMFI educating investors to avoid stopping SIPs during market dips?

V N Chalasani: The behavioural aspect of investors is something we are trying to address, but it cannot be changed overnight. When there is extreme volatility, even though getting more units at lower prices makes rational sense, people do get panicky and stop their SIPs.

SIP stoppages happen for three reasons. One, when investors have achieved their goals. Two, when they are rebalancing — for instance, moving from small cap to flexi cap. Three, when they stop temporarily for a month or so due to volatility or other factors.

Beyond three months, SEBI considers an account inactive. Up to one month is classified as a temporary stoppage.

What we have observed in the data is instructive. In April, the number of accounts that stopped was higher than the number of new accounts opened. But in May, new accounts opened exceeded closures. More importantly, the number of contributing accounts — those actually contributing to the ₹30,000–31,000 crore monthly SIP figure — has remained stable, moving by 10–15 basis points.

One proposal under active consideration by SEBI is an auto-debit mechanism for salaried accounts, where SIP contributions are automatically credited. If approved and implemented, that could be a meaningful game changer.

Have there been discussions with SEBI on how this will pan out?

V N Chalasani: We are in dialogue with SEBI. They are broadly convinced, but are working through the operational aspects — specifically, which types of corporates will be allowed to facilitate this auto-debit. That process is ongoing.

At an industry level, do you have any targets for growth in investor base and AUM for the next five years?

V N Chalasani: Today, our AUM-to-GDP ratio is around 20–21%. The global average is 65%, and in some developed economies it exceeds 100%. The scope for growth is enormous.

On the investor base: we are currently at around 6.2–6.3 crore investors, and we are targeting 10 crore investors by 2030. The focus is not just on Tier 2 and Tier 3 cities — even within Tier 1 cities, there are major centres where investor additions are not happening yet. SEBI has also introduced incentivisation specifically for women investors, across all tiers.

On AUM: our objective is to reach at least 50% of GDP. In absolute numbers, we are targeting approximately ₹150 lakh crore by 2030.

Amid heavy FII outflows, SIPs have acted as a cushion to protect share prices from crashing. Do you think the role of SIPs is being underappreciated in making markets safer, even for direct equity investors?

V N Chalasani: I come from the markets — I was in the treasury at SBI — and I have always believed that for a market to develop, it needs liquidity. If there is sufficient liquidity, large volumes of buying and selling should not distort prices unless there is a fundamental problem.

If you go back 10-20 years, markets were extremely volatile because of external factors — geopolitical tensions, inflationary pressures, interest rate movements elsewhere, or better valuations in other markets. FIIs would come in and the markets would appreciate; FIIs would exit and markets would collapse. I would check every day what FIIs were going to do — they were the big game changers, precisely because domestic liquidity was insufficient.

Today, domestic mutual funds are providing market robustness, and we need to appreciate that. Some people say we are providing an easy exit for FIIs but that’s not the case. This proves the maturity of the market, and it will be one of the biggest positive factors attracting FIIs back in a big way. They will be comfortable entering because they know this is a robust market that will also give them the ability to exit when needed.

A developed market is the one with liquidity and where large volumes can be handled without a big shake-up in the market. And that’s what domestic institutional investors are providing today, and we should appreciate that.

The earlier narrative was that people were withdrawing bank deposits to invest in mutual funds. Now the narrative is that FIIs are getting an easy exit because of domestic mutual fund buying. Mutual fund industry seems to always be on the receiving end.

V N Chalasani: Even when people said banks weren’t getting deposits because of mutual fund investments, we went on record to say that liquidity remains within the banking system regardless. When you and I invest in mutual funds, the money doesn’t leave the banking system — only the form changes. What was a savings bank deposit or a fixed deposit now comes back to the bank as a current account balance or as a certificate of deposit raised through money market instruments. The liquidity always stays in the system.

Similarly today, while FIIs are getting an option to exit, they will come back — because we have provided liquidity, and they know this is a robust market that gives them comfort on entry as well as exit.

What would be your message to a first-time investor whose portfolio might be seeing negative returns for the first time?

V N Chalasani: Any investor who opens their app and sees negative returns will feel a pinch — that is natural. But the key message is: you are not a short-term player. A short-term player is someone buying and selling within a short period, trying to make a quick profit. You are a long-term investor.

We always tell investors: it is not the timing of the market that matters. It is the time you spend staying in the market that matters. Keep your goals in mind. Understand your risk appetite. If you are a conservative investor, you don’t need to be in equities — there are product choices suited to every risk profile.

Do not get worried about short-term falls. These things happen. And one important thing we try to communicate: even if the market falls, think of it as a small cost you are incurring for a long-term benefit you will accrue. When you reframe a temporary fall as a cost rather than a loss, your attitude changes. Be an informed investor, and stay invested.

Investors now have a plethora of options — active funds, ETFs, passive funds, and now SIFs. With so many ETFs and new fund categories being launched, is this becoming a problem of plenty for small retail investors?

V N Chalasani: Credit must go to SEBI here. The categorisation is straightforward — large cap means the top 100 companies, mid cap is clearly defined, small cap likewise. The names of categories clearly indicate where the money is going. There is no real complexity.

We currently have around 6.3 crore investors, but the scope is enormous. A SEBI survey recently showed that 53% of Indian households are aware of mutual funds — but only 6% have actually invested. There is a huge gap between awareness and action. We need more investors and more distributors spread across the country.

As for the number of schemes growing, that is a natural consequence of more AMCs entering the market. I am not worried about it, as long as we maintain transparency and trust, and the long-term growth story of the country remains intact — which I believe it does.

SIFs are something different altogether. They address a gap that existed between the ₹10 lakh and ₹50 lakh investor segment. Above ₹50 lakh, investors have access to PMS. Below ₹10 lakh, mutual funds serve them well. But investors in the ₹10–50 lakh range with higher risk appetite had no appropriate regulated product. SIFs have been introduced to bring them into the regulated market. So I don’t believe there are too many schemes; each has a purpose.

Active mutual funds have been successful in India for a long time. Now we are seeing two new trends — passives (index funds and ETFs) and SIFs. Where do you see these two areas growing?

V N Chalasani: There is room for everyone. In developed markets like the US, passives dominate. But there is a structural difference between those markets and India.

In India, the top 100 companies have tremendous liquidity and limited scope for arbitrage or alpha generation. However, in mid-cap, small-cap, sectoral, and thematic investing, there is tremendous scope for research, arbitrage, and alpha generation. To my mind, passives with lower expense ratios make sense for large-cap exposure, but for mid and small cap and sectoral or thematic categories, active management will continue to have a meaningful role.

It will not be either-or. Both will survive and grow together for some time to come.