India's mutual fund industry is witnessing rapid growth in hinterland territories. So much so that states that are generally known for poor financial literacy have outperformed the overall sector's growth during the year 2016-17.
Sector executives attribute the growth in smaller cities to continuous rise in awareness programmes and investors' education. Further, they add given the unattractiveness of other traditional financial avenues like banks' deposits, investors are increasingly shifting towards mutual funds.
Consider this: States like Bihar, Jharkhand, Chhattisgarh, Madhya Pradesh, Jammu Kashmir and Assam reported assets growth of 50-70 per cent - quite higher compared with the 37 per cent growth on all India basis. One factor which has aided for the high growth is the low base effect.
Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon Mutual Fund, says, "Mutual Funds are not only for wealthy customers. It's for all. There was an inherent need for such products in smaller towns and cities but was largely not felt. Over the last few years, people from these regions are fast realising the importance of investments in mutual funds. Wealth creation has a universal appeal and mutual funds are a superior product which customers are getting align too, slowly but steadily."
Incentives for distributors in B-15 cities had provided the much needed push for mutual fund penetration in smaller towns and cities. In the past few years, there have been several road shows conducted by various fund houses to create awareness about mutual funds.
A Balasubramanian, CEO of Birla Sun Life Mutual Fund, says, "There is a significant acceptance of mutual funds as investment vehicles from across the country. Especially, from B-15 cities there are large number of applications coming in. A lot of factors have contributed in bringing more inflows and participation from these states. Further, other traditional investment avenues, typically banks' deposits, are losing attraction among customers over the last one year. I believe, impact of lessening deposit rates is yet to come in mutual funds."
Agrees Sikka. According to him, "The current growth in hinterland is nothing but a tip of the iceberg. At current times when rate of interests from banks are less attractive, mutual funds are being looked after for wealth creation. And when it comes to wealth creation, no matter whether it is small or big city, money will keep flowing in. I am a firm believer of the fact that if one removes the corporate money and compare only retail influx, smaller cities and lesser explored states will outnumber the big cities and metros."
As on March, the total average assets under management of the sector stood at Rs 18.57 lakh crore, up 37 per cent against last year. The number of systematic investment plans (SIPs) stand at 13.5 million contributing nearly Rs 4,400 crore per month as of now. The overall account numbers stand above 50 million.
