Contribution of small towns -- known as beyond the top 15 cities (B15) -- to mutual funds' asset base in India surged 47 percent on year
Mutual funds' assets under management (AUM) from B15 grew to Rs 3.41 lakh crore in May 2017 from Rs 2.32 lakh crore in May 2016, according to the data available on the Association of Mutual Funds in India website.
Contribution of small towns -- known as beyond the top 15 cities (B15) -- to mutual funds' asset base in India surged 47 percent on year.
AMFI data showed that 18 percent of the assets of the mutual fund industry came from B15 locations in May 2017. MF experts attribute the growth in the assets to a positive sentiment in domestic markets along with well-timed initiatives by SEBI to re-energise the mutual fund industry, particularly higher commission to distributors for going to B-15 cities.
In May, BSE Sensex rose 4 percent while Nifty went up 3.4 percent.
To increase penetration and popularise mutual fund products in rural areas, SEBI, in 2012, had mandated fund houses to go to 'B15' cities and for this the regulator had allowed fund houses to charge an additional 30 basis points in the total expense ratio if new inflows from B15 cities are at least 30 percent of gross new inflows in the scheme or 15 percent of the average assets under management, whichever is higher.
After SEBI's push, many fund houses revised their commission structure for distributors in B15 to incentivise them to get more people to invest in mutual funds.
High commission is paid mainly for equity-oriented funds and monthly income plans where the fund houses feel they can earn enough for themselves, before passing on the rest to distributor as commission.
A major portion of the products sold within this fast growing pocket of the industry are equity funds unlike the top 15 space, where institutional dominance tilts the balance towards fixed income products, mutual fund officials said.
In May, 54 percent of the assets from B15 locations were in equity schemes, while equity-oriented schemes accounted for 31 percent of the T15 assets in May 2017 and 27 percent in May 2016.
The higher concentration in debt in T15 locations was due to the presence of institutions in this segment.
B15 cities are those which are beyond these top 15 cities New Delhi (including NCR), Mumbai (including Thane & Navi Mumbai), Kolkata, Chennai, Bengaluru, Ahmedabad, Baroda, Chandigarh, Hyderabad, Jaipur, Kanpur, Lucknow, Panjim, Pune and Surat.
Meanwhile, as per SEBI, equity mutual funds added over 6.5 lakh folios in the last month.
Besides, 26 percent of assets held by individual investors was from B15 locations and about 10 percent of institutional assets were from B15 locations.
Institutional assets were concentrated in T15 locations, accounting for 90.03 percent of the total. The shares of B15 assets individual and institutional categories increased since May 2016. The share of T15 assets individual categories decreased marginally.Currently, 42-player MF industry manages assets worth Rs 19.04 lakh crore as on May 31.