MF assets from hinterland see sudden, sharp dip

Drop comes when overall sector's assets grew 10%, and AUM of top 15 cities at 12% beat sector average

Investments in mutual funds (MFs) from beyond the country’s top 15 cities, B-15 in sector parlance, has been on a decline in recent months.

This drop comes after a surge in B-15 areas over the past two years, thanks to incentives from the Securities and Exchange Board of India for asset mobilisation from the hinterland. Assets under management (AUM) from B-15 in July was Rs 2.04 lakh crore, 12.5 per cent down from May. During this period, key stock indices, though volatile, gained a little over one per cent. Thus, this wasn't due to a fall in the market value of these assets.

And, the drop in B-15 assets came when the overall sector’s assets grew about 10 per cent, while that from the top 15 cities (T-15) outperformed the sector average, with growth of a little over 12 per cent to Rs 11.1 lakh crore, from Rs 9.9 lakh crore earlier, according to the Association of Mutual Funds in India. The fall could be due to redemptions by investors after a sharp rise in market volatility.

Noticeably, June-July saw key indices fall 12 per cent at one point of time against their recent peaks earlier this year. The drop in B-15 assets has taken those in the sector by surprise. The fall has come at a time when the total AUM has, for the first time, reached Rs 13 lakh crore.

Rajiv Shastri, managing director of Peerless MF, said: “There could be a possibility of a turnaround in investors' behaviour in B-15 towns. Either investors might be holding back investments or there could be some withdrawal.”

G Pradeepkumar, chief executive of Union KBC MF, says, “The maturity among investors in B-15 cities is not as much as in their T-15 peers when it comes to market movement. The markets were volatile and redemption because of this could be a possibility.”



With the decline, the overall contribution of B-15 to sectoral assets slipped to 15.5 per cent in July against 19 per cent in May. Further, the proportion of assets held by individual investors from B-15 fell to 23 per cent against 24.2 per cent in May. B-15 locations, however, have a better balance of equity and non-equity assets. Nearly 50 per cent of the assets are in equity schemes, while T-15 account for 28 per cent in equity assets, mainly because of the presence of institutions in larger cities.