Mutual Fund Sahi Hai – But Not Just Equity

For over three decades, mutual funds have transformed the way Indians invest. From being a niche product for a select few, they have become a mainstream financial instrument trusted by more than five crore investors across virtually every pin code of the country. This success story was built on transparency, investor-first principles, and disciplined awareness campaigns like “Mutual Fund Sahi Hai”, which changed the narrative around wealth creation.
Source: AMFI

But as we celebrate this achievement, it’s time to pause and ask a fundamental question: Are we doing enough to serve every investor’s need?

The Equity-Centric Reality

Today, the bulk of our industry’s assets under management (AUM) flows into equity. Equity has delivered strong returns over time, and it remains a powerful wealth-creation tool. However, mutual funds are not just about equity. Debt funds, gold, silver, REITs, InvITs, and other alternatives remain underrepresented in investor portfolios.

Consider this: despite a five-year bull run in precious metals, the total AUM in gold and silver funds is less than what India imported in a single month. Similarly, REITs and InvITs—products that may offer relatively stable income and diversification—barely register in industry numbers. Even categories like performing credit, long-short funds, and alternative investment funds (AIFs) have seen limited traction.
Source: AMFI, Goodreturns

This imbalance matters because not every investor seeks high volatility or equity-linked risk. Many want safety, liquidity, and predictable returns. Liquid funds, for instance, may offer relatively better returns than idle cash in savings accounts, yet convincing people to move from currency notes or low-yield accounts remains a challenge.

The Bigger Picture: Where Does India Park Its Money?

Let’s look at the numbers. India’s mutual fund AUM stands at approximately ₹80 lakh crore. That sounds impressive—until you compare it with the ₹38 lakh crore lying in currency circulation. In other words, more money sits idle in physical cash than in mutual funds, despite the latter being a regulated, transparent, and professionally managed avenue.

The situation becomes even more striking when you consider investor behaviour. Many Indians still prefer Gold SIPs with local jewellers—paying high making charges and facing the risk of fraud—instead of choosing regulated, insured, SEBI-monitored products. A monthly SIP with a local jeweller often involves hefty making charges and may even lead to purchasing 22-karat gold priced as 24-karat. This creates the risk of losing money entirely if the jeweller defaults.

This is not just about rural or semi-urban India. Even in metros, large sums remain in current accounts earning zero return or in savings accounts earning 2.5%. Compare that with liquid funds, which offer better yields with similar liquidity. Yet, the mental shift hasn’t happened.
Source: AMFI, Times of India & India Today

Why This Matters Now?

For the last four years, foreign portfolio investors (FPIs) have been relentless sellers in Indian markets. Promoters too have used mutual funds as an exit route. In this environment, domestic mutual funds have played a stabilizing role, absorbing supply and supporting markets. But when we evaluate ourselves against competing financial products, we must ask: Are we truly keeping the client first?

On transparency and alignment of interest, mutual funds score high. Ours is the only industry where the distributor’s interest and the investor’s interest are aligned. SEBI has been proactive, even introducing a unique two-basis-point levy for investor awareness campaigns—something unheard of globally. This initiative funded the iconic “Mutual Fund Sahi Hai” campaign, which took mutual funds to five crore investors across India.

But awareness alone isn’t enough. The campaign succeeded in popularizing equity investing, especially through SIPs. Now, we need a new narrative:
“Mutual Fund Sahi Hai, Lekin Mutual Fund Sirf Equity Nahi.”
Source: AMFI

The Untapped Opportunity in Non-Equity Products

Debt funds remain the first love for many of us who started our careers managing fixed income portfolios. Yet, industry AUM in debt has stagnated. Gold and silver funds, despite strong performance, have negligible penetration. REITs and InvITs— suitable for investors seeking regular income—are barely visible in retail portfolios.

Why does this matter? Because India is a country of savers. We have flows seeking safety and stability, but they often end up in inefficient avenues—cash, low-yield deposits, or unregulated schemes. If we can channel even a fraction of these flows into regulated mutual fund products, we will create better outcomes for investors and deepen our markets.

The NRI Angle: A Missed Opportunity

Another area where we need to do better is offshore investing. SEBI has allowed mutual funds a $7 billion limit for overseas investments. Yet, last year, individual remittances under the Liberalized Remittance Scheme (LRS) were about $37 billion—five times the industry’s offshore limit. Despite our track record, we haven’t convinced regulators to expand this cap for institutional investors. This is a conversation we must continue, because Indian investors deserve global diversification through trusted domestic platforms.
Source: Economic Times BFSI

What Needs to Change?

To address these gaps, we need a multi-pronged approach:

• Product Innovation: Develop solutions for safety-seeking investors—short-duration debt funds, gold ETFs, hybrid products, and income-oriented strategies.
• Investor Education: Work with regulators, distributors, and media to explain why a 6% return in a debt fund is better than zero in cash or 2.5% in savings accounts.
• Behavioural Shift: Challenge cultural biases like gold SIPs with local jewellers. Highlight the security and transparency of regulated products.
• Regulatory Engagement: Advocate for higher offshore investment limits and flexibility in product design to meet evolving investor needs.
• Digital Outreach: Use technology to simplify access, improve transparency, and personalize advice for non-equity products.

The Road Ahead

Mutual funds have empowered millions of Indians to participate in wealth creation. But the journey isn’t complete. We need to broaden the horizon beyond equity, tap into the vast pool of idle savings, and create a culture of diversified investing.

As an industry, we must ensure that when we retire, we do so with the satisfaction of having created a truly inclusive investment ecosystem—one that serves every investor, from the risk-taker to the safety-seeker.

Mutual funds are indeed “sahi,” but they are much more than equity. It’s time we make that clear.

Key Takeaways

• Mutual fund AUM: ₹80 lakh crore vs. ₹38 lakh crore in currency circulation.
• Five crore investors reached through “Mutual Fund Sahi Hai” campaign.
• Offshore investment cap: $7 billion vs. $37 billion in individual remittances.
• Gold and silver fund AUM: less than one month’s import value.
• Savings account yield: ~2.5% vs. liquid fund returns.

Source: Mr. Nilesh Shah’s speech in the recent Mutual Fund Conclave organised by Bombay Chamber of Commerce & Industry

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