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The top equity growth mutual funds with the best returns in the last 3 years

<div type="image" title="Are Indians depositing less money in banks, or more in mutual funds? Turns out, it&amp;#39;s neither of those." msid="113663806" hostid="261" sizebytes="1121785"></div> Over the past few months, there’s been a lot of brouhaha about the lagging pace of <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialisation of <keyword id="20751315" type="General" weightage="20" keywordseo="household-savings" source="keywords">household savings</keyword> in the country or the rising preference of Indians towards <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword> through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by Franklin Templeton, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are household deposits really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. <div type="image" title="Yes, household deposits (as % of total deposits) have dipped, but the drop is far from significant" msid="113663882" hostid="261" sizebytes="306706"></div> Also, we can’t forego the fact that the share of Indian households in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and <keyword id="114757" type="General" weightage="20" keywordseo="savings-account" source="Orion">savings account</keyword> deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (Central Board of Direct Taxes) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of Securities Transaction Tax (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell <keyword id="6361918" type="General" weightage="20" keywordseo="equity-mutual-funds" source="Orion">equity mutual funds</keyword>, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by <keyword id="45369" type="General" weightage="20" keywordseo="equities" source="Orion">equities</keyword> can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in <keyword id="19998084" type="General" weightage="100" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the Fed recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next MPC (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day. Do you have insights or personal experience to share on your personal finances or money? Contact us at <a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a>.

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

By the term ‘Mutual Funds’, we mean the money pooled out through the contribution of many investors who intend to save and make money through their investments. The corpus thus created with the investment of these individuals is then invested in different categories namely debt funds, liquid assets and others. The individuals investing in mutual funds have to share the profits and losses equally in proportion to the value of their contribution to the corpus of the mutual funds. Here are the different kinds of mutual funds in India. <keyword id="6354820" type="DEFINITION" weightage="20" keywordseo="mutual-fund">Mutual fund</keyword> types based on asset class Equity funds Equity funds are those that are invested in stocks or shares of different companies. Since these investments can provide higher results, they are also called as high risk funds. Debt funds Debt funds are those that are invested in debt such as government bonds, fixed income assets and company debentures. These are considered as safe investment options since they provide fixed retruns to the investors. Money market funds Money market funds are those that are invested in liquid instruments. Some examples to this type are CPs and T-bills. These are also deemed as safe investment options since you will get an immediate return on your investment though the returns might be moderate. Balanced or hybrid funds Hybrid funds also called as balanced funds are invested in different kinds of asset classes. When the proportion of debts are found lower than the equity or when the equity is found lower than the proportion of debts, this kinds of funds enable striking a balance between risks and returns. Sector funds Sector funds are those kinds of investments in which the investor chooses to invest in a particular sector or the division of the market. For example, infrastructure fund investors invest in sectors confined to the infrastructure. They might also choose the investment instruments offered by the infrastructure companies. Returns on sector funds investments are directly related to how the given sector performs. The risk factor with regard to these investments vary between sectors. Index funds Index funds are investment tools that represent a specific index on the stock exchange for the purpose of monitoring the returns and how the index moves. In other words, it is like purchasing shares from the BSE Sensex. Tax-saving funds Tax-saving funds are those that are invested predominantly in equity shares. Tax-saving funds enable an investor to claim the tax deductions under the income tax act. The risk factors that are involved in such kinds of investments are very high. Also, in case these funds perform well, higher returns are possible. The tax saving aspect is one of the major attractions connected with these kinds of investments. Those that are willing to take high risks for the sake of inviting higher returns prefer this model. Funds of funds Funds of funds are those that are invested in other mutual funds. The returns on such investments depend on how the target funds perform on the whole.

Different types of Mutual Funds that you can buy in India

New Delhi, Jan 16 () Mutual funds industry body Amfi has requested the government to allow low cost debt-linked saving schemes, with tax benefits, to deepen bond market, and lower holding period in gold and commodity ETFs to one year from existing three years for LTCG purposes.
 In its Budget proposals to the Finance Ministry, the industry body has also demanded that the government recognise mutual funds (MFs) as specified long-term assets, qualifying for Long-Term Capital Gains (LTCG), as well as bring ULIPs of life insurance companies and equity MF schemes on par.
 The mutual fund body has also asked for dividend distribution tax (DDT) exemption for EPFO, NPS and insurance companies investing in MF schemes and pass-through status for income tax purpose to those Category III AIFs which make 65 per cent investments in listed equities.
 "Amfi's suggestions have been in the Budget proposal list for a few years. We are hoping this time our long pending submissions get addressed, which would help take the Indian MF industry not only to the next level of growth but also help in contributing to making economy stronger, especially with deepening of bond market, making long term availability of funds for infrastructure growth, and reducing the fiscal deficit by shifting investments from pure gold to gold ETFs," Amfi Chief Executive N S Venkatesh said.
 Some of the proposals are also aimed at bringing parity with comparable investment avenues and making mutual funds more retail investor friendly, he added.
 The Association of Mutual Funds in India (Amfi) said that mutual funds should be allowed to introduce low-cost, lower-risk tax-exemption-linked debt-linked savings schemes (DLSS) on the lines of equity linked saving schemes (ELSS).
 It further proposed that investments up to Rs 1.5 lakh under DLSS be eligible for tax benefit, subject to a lock in period of 5 years.
 At present, equity-linked savings schemes qualify for tax benefits under Section 80 CCC of the Income Tax Act for an investment limit of up to Rs 1.5 lakh in a fiscal year.
 In order to make gold and commodity ETFs more attractive, the industry body has proposed to lower the holding period for LTCG purposes from 3 years to 1 year, as is the case for listed debt securities.
 Besides, Amfi has requested clarity in respect of creation of segregated portfolio in mutual fund schemes, on capital gains tax treatment upon sale of mutual funds units with regard to the treatment of the units allotted consequent on segregation of portfolio.
 In addition, it has proposed that the threshold limit in equity oriented mutual fund schemes be restored to 50 per cent. Reducing the threshold limit of equities from 65 per cent to 50 per cent for being regarded as 'equity-oriented fund' would encourage more investors with lower risk appetite to invest in such funds.
 Amfi has also proposed that the definition of equity oriented funds be revised to include investment in Fund of Funds schemes, which invest predominantly in units of equity oriented mutual fund schemes. SP 
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Amfi pitches for debt-linked saving schemes with tax benefits in Budget proposal

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The top equity growth mutual funds with the best returns in the last 3 years

BI India Bureau

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

Ira Alok Puranik

Different types of Mutual Funds that you can buy in India

BI India Bureau

Amfi pitches for debt-linked saving schemes with tax benefits in Budget proposal

PTI

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