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Low-income small investors bet big on equities; semi-urban inflows on the rise

If those in the income bracket of Rs 5-10 lakh are added, then total investors in the income bracket of up to Rs 10 lakh goes to 1.65 crore, or 89.29 per cent of the overall individual investors.

Written by Sandeep Singh | New Delhi |
December 16, 2021 3:30:13 am
A hike in fixed deposit rates was announced by Bajaj Finance earlier this month — by 0.30 per cent for tenors between 24 and 60 months on fixed deposits (FDs) of up to Rs 5 crore.

Individuals with income of up to Rs 5 lakh account for 1.3 crore investor accounts, or 70.01 per cent of total individual investors across the country, till October 31, data from the Securities and Exchange Board of India (Sebi) shows. This set of investors, however, had Rs 9.16 lakh crore, or 28.54 per cent of the total assets under management (AUM) of the mutual fund industry.

If those in the income bracket of Rs 5-10 lakh are added, then total investors in the income bracket of up to Rs 10 lakh goes to 1.65 crore, or 89.29 per cent of the overall individual investors.

On the other hand, India had only 1,35,691 investors in the income bracket of over Rs 1 crore and they accounted for 30.94 per cent of the industry AUM. According to data sourced from Income Tax Department, 97,695 people had gross total income of Rs 1 crore and above in 2018-19.

Mutual fund industry insiders say there has been a sharp jump in new investor flows from small towns and semi urban areas over the last 15 months. Data shows that the number of systematic investment plan (SIP) accounts has jumped from 3.12 crore in March 2020 to 4.78 crore in November 2021, witnessing a rise of over 53 per cent.

Even demat accounts have witnessed a sharp rise in the same period. Investor accounts with Central Depository Services Limited (CDSL) rose 148 per cent from 2.12 crore in March 2020 to 5.26 crore in November 2021.

The inflow of investors have been in line with the sharp rise in equity markets over the last 18 months, when the benchmark Sensex shot up from 29,468 in March 2020 to hit a high of over 62,000 in October 2021. The 30-share index closed at 57,788 on Wednesday, December 15.

While brokers and mutual fund industry insiders say that there has been a big influx of retail investors from small towns and semi-urban areas, AUM data released by Association of Mutual Funds in India (Amfi) shows that the share of ‘Other cities’ (those beyond top 110 cities) in the industry AUM has risen from 10.21 per cent in June 2020 to 16.09 per cent in the quarter ended September 2021. In the same period, the share of top 5 cities in the industry AUM has come down from 63.88 per cent to 55.97 per cent.

Over the past few years, there has been a significant rise in investments in mutual funds from B-30 cities (those outside of top 30 cities), as their AUM has grown 86 per cent from Rs 3.48 lakh crore in 2019-20 to 6.46 lakh crore as of October 2021. During the same period, the total industry AUM rose by 68 per cent.

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