Smaller cities lead in opening new mutual fund folios

The number of new investor fund folios coming from smaller cities has been rising on a monthly basis. The mutual fund industry has added 2.3 crore investor folios from April till August 2024 out of which more than 50 per cent of them have come from smaller cities, according to a study by Zerodha Fund House.

It said smaller cities still account for only 19 per cent of the overall assets under management (AUM) of the mutual fund industry. This indicates that while more individuals from these regions are participating in investments, the average investment size may still be lower compared to those from larger urban centres. These smaller cities are classified as B-30 cities (Beyond the top 30 cities) by Association of Mutual Funds of India (AMFI).

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“As of August 2024, about 54 per cent of all the SIP accounts in the mutual fund industry is contributed by SIPs from smaller cities. Smaller cities have a larger number of SIP accounts reflecting greater penetration in less urbanized areas,” it said.

From April to August 2024, the growth rate in the SIP accounts in smaller cities for Index Funds (18.7 per cent) is higher than the growth rate of any other category in the industry. Altogether, about 79 per cent of the SIP accounts from smaller cities are contributed by growth/ equity-oriented schemes, Zerodha said.