The contribution of small towns to the asset base of mutual funds in India has reached the record level of Rs. 3.5 lakh crores in June 2017, which is indicative of a 46% increase over data recorded in the previous year. As per the data published by AMFI (Association of Mutual Funds in India), this increase has mainly happened in cities and towns that are smaller than the top 15 cities in India, which earlier cumulatively contributed Rs. 2.42 lakh crores as per the June 2016 data.
A key factor driving this increased interest in mutual funds at these locations is greater investor education promoted by leading organization such as AMFI and SEBI (Securities and Exchange Board of India). Whereas, other reasons for this increased penetration include persistent advertising campaigns run by these organizations on national television and increased incentives offered by SEBI to fund houses for selling their funds to investors located in the country’s smaller town and cities.
A major portion of the mutual fund investments occurring in these smaller urban centres is through SIP or systematic investment plans made mainly in equity mutual funds. The AMFI data shows that approximately 54% of the mutual fund’s assets from these locations were invested in equities, while in the 15 largest cities, equity investments comprised approximately 31% of total assets. It is also noteworthy that while only 9% of individual investors showed a preference for direct plans, the number was much higher at 17% for assets held by HNIs (high net worth individuals).