Mutual Funds: Participation from small towns in equity schemes increasing

Among the smaller towns, there are many that have seen their share in industry AUM double over the last six years.

Data also show that a large part of that money flow from smaller towns has come over the last four years.

Over the past four years, while equity markets have grown significantly and mutual funds (MFs) have witnessed their assets under management (AUM) nearly treble, an important development witnessed by the markets is the increased democratisation in equity participation and a rise in the number of domestic retail investors participating in the equity markets through MFs. Data accessed from the Association of Mutual Funds in India (Amfi) show that while the share of top-15 cities in the entire AUM has come down from 87.8 per cent in September 2011 to 84.1 per cent in September 2017, the share of cities beyond top-15 has risen from 12.3 per cent of the industry AUM to 15.6 per cent in the corresponding period.

What is significant is that the rise in share of smaller towns in the industry AUM has coincided with a significant jump in industry AUM. So, while the industry AUM rose from 6.4 lakh crore in September 2011 to 20.4 lakh crore in September 2017, the cities beyond top-15 saw their AUM share rise exponentially from Rs 78,829 crore in September 2011 to Rs 3,25,223 crore in September 2017. Experts say that a large part of the money coming from smaller towns is retail money into equity schemes as against a big share of institutional money coming into top-5 cities especially into debt mutual funds.

Data also show that a large part of that money flow from smaller towns has come over the last four years. In September 2013, the AUM from the cities beyond top 15 cities amounted to Rs 100,183 crore. The aggregate share of even smaller cities that individually hold a share of less than 0.03 per cent of the total industry AUM as of September 2017 has jumped significantly from 1.2 per cent in September 2011 to 3.6 per cent in September 2017.

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While Mumbai saw its share in overall industry AUM decline from 48.65 per cent in September 2011 to 41 per cent in September 2017, Delhi and Chennai have been big gainers among top five cities. While the share of Chennai has risen from 4.92 per cent in September 2011 to 6.35 per cent in Sep 2017, the share of Delhi in the industry AUM has gone up from 11.48 per cent to 13.8 per cent in the corresponding period.

Among the smaller towns, there are many that have seen their share in industry AUM double over the last six years. While Mehsana saw its share in industry AUM rise from 0.02 per cent to 0.17 per cent, Jabalpur and Aurangabad saw their share double to 0.13 per cent and 0.14 per cent. Kharagpur’s share rose from 0.02 per cent to 0.07 per cent and that of Navsari rose from 0.04 per cent to 0.09 per cent during the same period.

Strong performance of equity markets has played a big part in this. In the period between September 2013 and December 14, 2017, the benchmark Sensex at the BSE has gained 78 per cent. Experts say that a higher participation by retail investors in equity markets not only deepens the market and provides stability but also leads to Indians benefiting from the India growth story.

“Well regulated equity markets and especially mutual funds have strengthened investor confidence in equity mutual funds. That, along with strong performance of equity markets has attracted small investors to adopt the mutual fund route to participate in equity markets,” said the head of a large fund house.

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