Mutual funds have always been a slow yet promising method of investment for new investors. Given the financial crisis in the Stock Market recently, the interest in these types of funds is bound to grow ahead. The industry will get more than 50% of investors from the smaller cities of India. Let’s explore more trends in the content that follows:
Mutual funds trend
According to a survey by Zerodha Fund House, the mutual fund market in India is seeing a large migration of new investors from smaller cities. Over 2.3 crore new investor folios were added between April and August of 2024, demonstrating a steady monthly increase in the number of new folios. Over half of the new investors originate from smaller cities, which AMFI has categorized as B–30 cities.
Lower average investment size
Still, just 19% of the mutual fund industry’s total assets under management (AUM) are located in smaller cities. “This indicates that while more individuals from these regions are participating in investments, the average investment size may still be lower compared to those from larger urban centers,” according to the research.
The retail segment’s average ticket size in smaller cities is approximately Rs 1.13 lakh, whereas the retail segment’s total average ticket size for (T30+B30) cities is approximately Rs 2.04 lakh.
Factor’s causing this crash
Live SIP account contributions
As of August 2024, SIPs from smaller cities contributed to around 54% of all SIP accounts in the mutual fund industry. According to the survey, smaller cities have more SIP accounts, which indicates higher penetration in less urbanized areas.
The growth rate of Index Fund SIP accounts in smaller cities from April to August 2024 (18.7%) is more than the industry growth rate for all other categories combined. Growth/equity-focused schemes account for around 79% of the total SIP accounts from smaller cities.
The growth rate in SIP accounts for various plan categories (as determined by MCR) for the current fiscal year, which runs from April 2024 to August 2024, is shown in the table below.
Easier access to direct plans
More than half of all new investor folios in smaller cities are now investing through direct investment due to the growth of smartphone apps, digital payment methods, and industry efforts. There has also been a rise in the development of Fintech Apps that have helped common masses get into the field of mutual funds and beyond.
Bottom line
The patterns show that smaller towns are becoming essential to the mutual fund industry’s future, in addition to being a major factor in its growth. A wider range of people may now participate in the financial markets thanks to the emergence of direct plans and fintech solutions, which have democratized access to mutual fund investments. As financial literacy rises and more people become aware of the advantages of investing in these funds versus more conventional savings options, this trend is probably going to continue.
Ultimately, 2024 looks to be a significant year for mutual funds in India. The financial sector is poised for steady expansion thanks to a growing pool of investors and cutting-edge goods that meet a range of needs. Investors can take advantage of the opportunities given by this changing market environment by staying educated and carefully matching their portfolios with their financial objectives. Mutual funds are expected to maintain their place as a key component of wealth development for many Indians as confidence among ordinary investors grows.
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Further read: Demo accounts in Forex.
