Smaller cities account for 54% of all SIP accounts: Zerodha MF

about 79 percent of the SIP accounts from smaller cities are in growth or equity-oriented schemes.

The share of smaller cities in the overall assets under management (AUM) of the mutual fund industry may well be a minority but investors from such locations account for more than half of all SIP accounts, as per a latest study by Zerodha Mutual Fund.

According to the study, the number of new investors coming from smaller cities has been rapidly rising with nearly 50 percent of the 2.3 crore new investor folios (added between April and August) coming from smaller cities.

More importantly, about 54 percent of all SIP accounts in the mutual fund industry are originating from smaller cities, as of August 2024.

However, smaller cities still account for only 19 percent of the overall AUM of the mutual fund industry, as per the report.

“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,” stated the report.

The number of investors from these smaller cities -- classified as B-30 by industry body Association of Mutual Funds -- has seen a rapid increase due to a number of reasons.

According to the report, the first reason has been the rise in live SIP accounts. The report highlights that between April and August 2024, the growth rate of SIP accounts in smaller cities for Index Funds was around 18.7 percent, which is higher than the growth rate of any other category.

Additionally, about 79 percent of the SIP accounts from smaller cities are in growth or equity-oriented schemes.

The second reason attributed to the trend is access to direct plans. The report notes that the rise of smartphone apps, direct investment platforms, digital payment systems, and industry initiatives has played a big role in bringing in more than 50 percent of all the new investors in smaller cities to invest through direct plans.

As per AMFI data, open-ended equity mutual fund inflows rose 3.03 percent to Rs 38,239.16 crore in August. Net AUM of the mutual fund industry also rose to Rs 66.70 lakh crore. The net investments through SIPs was Rs 23,547 crore in August against Rs 23,332 crore in the previous month.

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