Illustration: Binay Sinha
According to a study by Zerodha Fund House, the mutual fund industry in India is witnessing a significant influx of new investors from smaller cities. The number of new investors has been steadily increasing on a monthly basis, with more than 2.3 million new investors added between April and August 2024. More than 50% of these new investors come from smaller cities, classified as B-30 cities by AMFI .
Data Source: AMFI, Zerodha Fund House
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However, smaller cities still account for only 19% of the mutual fund industry’s overall assets under management (AUM). “This indicates that while more people in these regions participate in investments, the average size of investments may be still smaller compared to those in larger urban centers,” the study notes.
The average retail segment ticket size in smaller cities is about Rs 1.13 lakh, while the combined average retail segment ticket size for cities (T30 + B30) is about Rs 2.04 lakh.
What are the factors that have contributed to this trend in smaller cities?
1. Contribution of real SIP accounts:
As of August 2024, around 54% of all SIP accounts in the mutual fund industry come from smaller city SIPs. Smaller cities have a higher number of SIP accounts, reflecting higher penetration in less urbanized areas, the study said.
From April to August 2024, the growth rate of SIP accounts in smaller cities for index funds (18.7%) is higher than the growth rate of any other industry category. In total, around 79% of smaller city SIP accounts come from growth and equity oriented programs.
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 new investors in smaller cities investing through direct schemes.
First published: October 4, 2024 | 12:04 p.m. IS
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