MF penetration: Maharashtra, Delhi in lead; Jharkhand in top 10

Industry insiders say MFs have gained better traction in Jharkhand due to presence of a large salaried class and strong distributor network

Maharashtra, New Delhi and Goa have the highest mutual fund penetration in India, thanks to the higher income levels, better literacy rates and strong inflows from corporates and high net worth individuals. However, it is not that all higher income and developed states have high MF penetration and all 'poorer' states lag behind.

For example, mutual fund penetration is only 5- 6 per cent in Kerala and Telangana, while Jharkhand is among the top 10 states, with a depth of 13 per cent, according to data from Association of Mutual Funds in India (Amfi).

Amfi calculates MF penetration as the ratio of the states' assets under management in MFs and the gross state domestic product (GSDP).

Jharkhand has proven to be a better market for mutual funds given that a good chunk of the urban population is salaried and prefer mutual funds for regular investments, according to a senior MF sales executive. MF distributors based in Jharkhand also cite the strong network of agents and decent institutional investments.

However, institutional investments are unlikely to have jacked up the penetration level in Jharkhand considering the fact that 79 per cent of the total AUM from the state is in equities whereas corporates mostly invest in debt schemes.

On the other hand, states in the south like Kerala, Telangana and Andhra Pradesh have a comparatively lower penetration due to gold and real estate being the preferred investment avenues of investors in these states, said Babu Krishnamoorthy, founder of Finsherpa Investment Services.

Despite the higher penetration, the state ranks 16th in terms of per capita AUM (Rs 10,750), as per September quarter data. New Delhi, Goa and Maharashtra have the highest per capita AUM. They are the only three states whose per capita AUM is in excess of Rs 1 lakh.

Manipur, Bihar and Tripura have the lowest per capita AUM (Rs 2,300 to Rs 3,700).  In terms of MF penetration too, northeastern states are in the lowest positions. Among major states, the penetration is lowest in Kerala, Andhra Pradesh, Telangana and Bihar.