Metros continue to remain hot spots for mutual fund inflows

Share in assets from top cities rises in April-June to 73.6 per cent

At a time when Indian fund houses step up their demand for incentives and higher expense ratio in a bid to expand their reach, their dependence on the top five cities continued in the June quarter.

During the first quarter of the current financial year, top metros contributed 2.5 per cent more to the industry’s consolidated assets under management (AUM) at 73.66 per cent, against 71.12 per cent in the January-March quarter.

The rise has come after a continuous three quarters of declining trend, whereby the contribution of smaller cities had been on the rise. It was an encouraging signal for the industry as a whole, but it could not last for long.

....For instance, Mumbai alone contributed a massive 44.48 per cent of AUM in June against 42.13 per cent in March, according to data available from industry body Association of Mutual Funds in India (Amfi). Delhi, the second largest contributor, added additional gains of 53 basis points to 13.76 per cent in the industry’s assets.

On the contrary, the other top contributors—Bangalore, Kolkata and Chennai—witnessed dec-lines in their contribution on a quarter-on-quarter basis.

Low penetration of mutual fund products, especially in the country’s hinterland, has always ailed the industry.

And rightly so, as barring few top fund houses, no other asset management company has a widespread reach across the country.

“We cannot let go the institutional money. And that comes from top cities, mainly from Mumbai and Delhi. And that is what swells the proportion of assets from these cities. There is nothing wrong in managing institutional money, but I admit that flows from Tier-I & Tier-II cities continue to remain poor,” says the chief executive officer of a mid-sized fund house, who did not wish to be named.

At a time when the industry has been demanding more incentives to better their reach, decline in proportion of assets coming from smaller cities is a cause of concern.

The average AUM of the June quarter stood at Rs 6.93 lakh crore, up 4.3 per cent, compared with Rs 6.64 lakh crore as in the March quarter.