Palakkad, Daman beat Mumbai, Delhi in new mutual fund investor growth rate

MUMBAI: People from small towns such as Palakkad, Daman, Asansol and Imphal are investing in the capital markets through mutual funds at a faster pace than the well-heeled residents of metros including Mumbai and New Delhi – a trend that may deepen the local financial markets and reduce dependence on overseas investors.

Sale of mutual fund schemes in the smaller cities and towns have grown 45% in two years compared with a 6% increase in the top 15 cities, according to the Reserve Bank of India’s Financial Stability Report released on Tuesday.

“This indicates geographical diversification and brings stability to the mutual funds industry in India, warranting continued efforts for improving investor awareness and for strengthening the integrity of market processes and investor protection,” the RBI said in the report.

The number of folios in B-15 cities (outside the top 15) increased to 2.09 crore in March from 1.44 crore two years earlier, while they rose to 2.68 crore from 2.52 crore in the top 15 cities.

“Investor education programmes conducted in B-15 cities over the couple of years are bearing fruit,” said Jaideep Bhattacharya, founder of Top3Choice, a distributor of mutual funds. “Investment in those smaller cities and towns stay longer than top 15 cities. Increase in MF penetration is directly linked to investor education and convenience.”

Bhattacharya previously headed Bank of Baroda Pioneer MF and worked as chief marketing officer in Unit Trust of India MF.

Assets managed by India’s mutual fund industry climbed to Rs 12.33 lakh crore from Rs 8.25 lakh crore two years earlier, Crisil said, citing data from the Association of Mutual Funds in India.

Assets under management from B-15 cities, as a per cent of the industry, increased in both the equity and non-equity segments from March 2014 to March 2016, the RBI said. The exposure of debt-oriented mutual fund schemes to corporate bonds as a percentage of their assets under management increased by 4% between September 2015 and March 2016.

The Securities & Exchange Board of India recently revised prudential limits for sectoral exposure to 25% from 30% and reduced additional exposure limits with respect to housing finance companies in the financial sector to 5% from 10%.