Mumbai: Retail investors have allocated large sums to equity mutual fund plans in the past one year, buoyed by higher past returns, simplified products, tax efficiency, deeper penetration, and increased use of pooled funds as a wealth creation tool.Net inflows into equity-oriented schemes rose 95% to ₹4.3 lakh crore in September 2024 from ₹2.21 lakh crore a year ago, while inflows through systematic investment plans (SIP) increased by 41% to ₹2.43 lakh crore, compared with ₹1.72 lakh crore in the same period. With a buoyant equity market, many fund houses took the opportunity to launch new products that saw inflows of ₹1.11 lakh crore, a rise of 57% compared with ₹70,560 crore in the previous year. "Increased awareness about mutual funds has led to higher acceptance for investing in these products. This trend is rising and mutual funds have become the primary vehicle for many investors to build wealth," said A Balasubramanian, CEO of Aditya Birla Sun Life Mutual Fund.114442583A report by Nomura said that the Indian mutual fund industry remains significantly underpenetrated, with the industry assets under management (AUM) to GDP of 18% versus the global average of 65%. There are 50 million unique investors versus 750 million PAN cardholders, which translates into a penetration of 3.3%, thus providing a large addressable market."Several steps taken by the regulator, including categorisation and rationalisation of mutual fund schemes, have simplified products for investors. Transparency, flexibility, liquidity and ability to start investments with low amounts have attracted investors to mutual funds," said Dheeraj Gaur, CEO of Arete Capital Services.Distributors point out that portfolios of mutual funds are available every month and net asset value (NAV) is declared daily, which helps increase investor confidence. The low ticket size of ₹500, the flexibility to start and stop SIPs, and hybrid products that have equity taxation have attracted investors.Equity mutual funds also score in tax efficiency with long-term capital gains tax of 12.5% to be paid after holding for a year, compared to 30% in fixed-income products like fixed deposits for rich investors.However, some distributors also point out that many retail investors have come to mutual funds in the last 3-4 years chasing past returns and have not seen a drawdown so far."High returns with no drawdowns, have led to higher allocation from investors towards equity mutual funds. Several investors now prefer these products over traditional deposits," said Anup Bhaiya, CEO of Money Honey Financial Services.