More than 50% of new investor folios in the mutual fund industry now come from smaller cities (B-30 cities)

The number of new investor folios coming from smaller cities has been rising on a monthly basis. As per AMFI Mutual Fund Industry data, the mutual fund industry has added 2.3 Cr investor folios from Apr till Aug 2024 out of which more than 50% of them come from smaller cities. Such trends may foster a culture of saving and investing, and ultimately contributing to long term discipline in investment and savings.

However, it’s important to recognize that smaller cities still account for only 19% of the overall Assets Under Management (AUM) of the mutual fund industry as of Aug 2024. This indicates that while we have more folios from these regions, the average investment size may still be lower compared to those from larger urban centers. These smaller cities are classified as B-30 cities (Beyond the top 30 cities) by Association of Mutual Funds of India (AMFI).

What are the factors that may have contributed to this trend in smaller cities?

1. Contribution from live SIP Accounts:
As of Aug 2024, about 54% of all the live 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.

From Apr to Aug 2024, the growth rate in the SIP accounts in smaller cities for Index Funds (18.7%) is higher than the growth rate of any other category in the industry. Altogether, about 79% of the SIP accounts from smaller cities are contributed by growth/equity oriented schemes.

The below table represents the growth rate in SIP accounts across different categories of schemes (as per MCR) for this financial year from Apr 2024 to Aug 2024.

2. Access to Direct Plans:
The rise of smartphone apps, direct investment platforms, digital payment systems, and industry initiatives has led to more than 50% of all the new investor folios in smaller towns to invest through direct plans.

Additional Information:
The average ticket size of the retail segment in smaller cities (B-30 cities) is about 1.13 lakh rupees while the combined average ticket size of the retail segment for (T30+B30) cities is about 2.04 lakh rupees. 

Conclusion:

The growth in the number of mutual fund investor folios from smaller towns may indicate a shift towards financial inclusion and investment awareness in these regions.

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Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.

Source:
AMFI Mutual Fund Industry data (Apr - Aug 2024), as communicated by AMFI 

Published on 7th Oct 2024