Smaller cities surge ahead: Mutual Fund investments outpace top cities

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Thanks to the liberal incentives and eye-catching campaign of the Association of Mutual Funds in India, the inflows into mutual funds from smaller cities are fast catching up and racing past the growth in top cities.

The share of Mumbai in the overall assets under management of the mutual funds industry has fallen to 27 per cent in the March quarter from 42 per cent in March 2017.

Pune, which gained market share to 4.04 per cent from 3.70 per cent, has toppled Ahmedabad, Chennai, and Kolkata to occupy the fourth position among the top 30 cities in terms of MF asset holdings, according to Geojit Insight.

In contrast, Durgapur, an industrial city in West Bengal, has seen its asset base jump 154 per cent to ₹5,585 crore while MF assets at Kota in Rajasthan have more than tripled to ₹5,589 crore in the last five years.

Sriram BKR, Senior Investment Strategist, Geojit Financial Services, said the efforts made by MF Distributors and Advisors, along with a constant endeavour from SEBI and AMFI, to attract new investors from smaller cities, is visible in the analysis of city-wise AUM data released by AMFI.

While the fall in the share of top cities in overall AUM can anecdotally be attributed to competition from other asset classes such as bitcoins, non-fungible tokens and real estate, the inflows from smaller cities were possibly driven by equity investments, he said.

ONE-YEAR TREND

Though ranked last among the top-100 cities, Alwar in Rajasthan has registered 51 per cent growth in MF assets at Rs 2,306 crore in the year ended September 30.

Coimbatore has retained 16th place with an AUM of ₹17,699 crore, while Madurai and Tiruchirapalli were ranked 57th and 77th with assets of ₹4,639 crore and ₹3,256 crore. MF assets in Jammu jumped 22 per cent to ₹3,232 crore in one year.

Mumbai, which logged a growth of 10 per cent in AUM at Rs 12.62 lakh crore, accounted for 27 per cent of overall industry assets of ₹46.58 lakh crore as of September-end.

Though SEBI has recently suspended the B-30 incentive, the mutual fund industry sees a big opportunity in tapping smaller cities. Prathit Bhobe, MD and CEO of Tata Asset Management Company, said despite the removal of B-30 incentive there is a phenomenal expansion in these markets.

In the last 18 months, Tata MF has started a virtual relationship manager channel through which a set of ARNs are mapped to centralised sales teams for reaching out to distributors in smaller towns, and the response has been very good given people’s affinity to the Tata brand, he added.