Skip to main content

Share of mutual fund assets from smaller cities growing

Sector has been focusing on bringing more customers via the Systematic Investment Plan mode
One of every four rupees invested by individual investors in mutual fund (MF) schemes now belongs to people from beyond the top 15 cities (B-15 in sector parlance).
The Rs 20 lakh crore sector has been trying for participation from smaller cities and towns. As on June-end, about 26.2 per cent or Rs 2.5 lakh crore of individual assets came from B-15 places. A year before, it was Rs 1.6 lakh crore and made up 23.8 per cent of total individual assets. The latter was Rs 9.48 lakh crore at end-June, against Rs 6.8 lakh crore a year before.
The sector has been focusing on bringing more and more individual customers through the Systematic Investment Plan (SIP) mode. There are now 14.5 million SIP accounts, which stoke a sticky and consistent Rs 5,000 crore of monthly flow.
A Balasubramanian, chief executive officer (CEO) of Aditya Birla Sun Life MF, says, “It is the outcome of the efforts that are being undertaken by the industry in increasing the penetration of MFs beyond big cities. This growth would continue to do well, given the high focus. We aim to ensure MFs become part of the daily conversations among individuals.”
Sector executives say India’s smaller towns and cities have huge amounts of money. Due to lack of awareness about MFs and good financial advice, these could not be brought into the folds of the fund sector in a bigger way. Which, they say, is changing fast. And given the fact that other traditional investment avenues like gold, realty, land and banks’ fixed deposits (FDs) are fast becoming unattractive from a returns’ perspective, B15 will play the next role of higher growth of the MF sector.
Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon MF, says: “Growth of B15 highlights that MFs are no more a big city phenomenon. It’s just a tip of the iceberg; there is tremendous potential to tap. As awareness and experience of investors improves, the industry would see much higher growth from these regions. Also, I am confident that post demonetisation, the flow of money into banking will find its way into funds.”
Already, interest rates on bank FDs are trending down. On savings’ balances, too, rates of interest are being cut to as low as 3.5 per cent. These developments have made investors search for avenues where returns are relatively better.
G Pradeepkumar, CEO of Union MF, says: “B-15 has a lot of potential to grow. In terms of number of retail folios, B-15 matches the top 15 cities but I believe the ratio can be 2:1 in favour of B-15 in the next three to four years."
The existing additional incentives to distributors if investors from B-15 are brought in have played a role. Further, several online innovations, much easier Know Your Customer (KYC) processes and advertisement campaigns have helped MFs to grow.
Currently, the top five cities — Mumbai, Delhi, Bengaluru, Chennai and Kolkata — contribute 71.5 per cent of all assets under management (AUM) of the fund sector. The next 10 cities, part of the Top-15, contribute nearly 13 per cent. These are Pune, Ahmedabad, Hyderabad, Baroda, Jaipur, Surat, Kanpur, Lucknow, Chandigarh and Nagpur.
The Business Standard, New Delhi, 10th August 2017


Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …