MFs' asset base from smaller cities up 41% at Rs 3 lakh cr in FY17

The contribution of the country's smaller towns — beyond-15 cities (B15) in industry parlance — to mutual funds' asset base surged 41 per cent to Rs 3.09 lakh crore by March-end due to investor-friendly initiatives by Sebi.

Mutual funds' assets under management (AUM) from B15 locations grew from Rs 2.18 lakh crore in March 2016 to Rs 3.09 lakh crore at the end of March 2017, according to latest data available with Association of Mutual Funds in India (Amfi).

"Steps taken by Sebi to increase penetration of mutual funds in smaller cities is paying dividend. Sebi allowed up to 30 basis points of extra expense to be charged to a fund to incentives distribution of funds in B-15 (Beyond Top-15 cities).

"This coupled with the increasing investor education programs has resulted in increasing investor awareness and many first time investors from smaller cities are investing into mutual funds," Director of Fund Research at Morningstar, Kaustubh Belapurkar said.

Currently, B15 accounts for 17 per cent of the total assets of the industry. Besides, these locations have a better balance of equity and non-equity assets.

Moreover, a large proportion of direct investments were in non-equity oriented schemes where institutional investors dominate.

"Investing through Systematic Investment Plan (SIP) has helped a lot, adding to the convenience of investors. We do expect a solid growth in B15 towns in the next five years," Sharekhan director, Jean-Christophe Gougeon, said.

B15 cities are those which are beyond these top 15 cities — New Delhi (including NCR) Mumbai (including Thane and Navi Mumbai), Kolkata, Chennai, Bengaluru, Ahmedabad, Baroda, Chandigarh, Hyderabad, Jaipur, Kanpur, Lucknow, Panjim, Pune and Surat.

A total of 53 per cent of the assets from B15 locations is in equity schemes, while the same is 29 per cent for T15 assets.

About 25 per cent of assets held by individual investors is from the B15 locations and 10 per cent of institutional assets come from such places.

On the other hand, institutional assets are concentrated in T15 locations, accounting for 91 per cent of the total.

Further, about 9 per cent of the retail investors chose to invest directly, while over 16 per cent of HNI assets were invested directly.

Together, all 42 mutual fund houses managed assets worth Rs 18.3 lakh crore at the end of March 31, 2017. This was 35 per cent higher from Rs 13.53 lakh crore managed by the industry in March last year.