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Smaller Cities Emerge as New Growth Drivers for Mutual Fund Industry

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Smaller cities are reshaping India's mutual fund landscape, challenging the traditional dominance of metropolitan centers like Mumbai. With declining shares in Mumbai and notable growth in smaller towns like Pune, Durgapur, and Kota, factors such as rising income, targeted outreach, and technological advancements are fueling this geographical transformation in the mutual fund industry.

The Indian mutual fund industry is witnessing a significant shift in its investment landscape, with smaller cities emerging as the new growth drivers. While metropolitan centers like Mumbai have traditionally dominated mutual fund investments, a surge in inflows from smaller towns is transforming the industry's geographical reach.

How the cities compare

Mumbai's share in the mutual fund industry AUM (Assets under Management) declined from 42% to 27%. AUM is the total market value of assets that financial institutions manage on behalf of investors.
Pune's market share increased to 4.04% from 3.70%.
Durgapur's MF assets jumped 154% to ₹5,585 crore.
Kota's MF assets more than tripled to ₹5,589 crore in the last five years.
Alwar in Rajasthan registered a 51% growth in MF assets at ₹2,306 crore.
Coimbatore retained 16th place with an AUM of ₹17,699 crore.
Madurai and Tiruchirapalli were ranked 57th and 77th with assets of ₹4,639 crore and ₹3,256 crore, respectively.
MF assets in Jammu jumped 22% to ₹3,232 crore in one year.

Mumbai's AUM growth was 10%, reaching ₹12.62 lakh crore, contributing to 27% of the overall industry assets of ₹46.58 lakh crore as of September-end.

The surge in mutual fund investments from smaller cities in India is driven by various factors, transforming the industry.

Factors contributing to surge in mutual fund investments in smaller cities

Rising Income and Awareness

Smaller cities show increased disposable income and financial awareness, fueling interest in mutual funds.

Targeted Outreach and Incentives

Distributors and advisors actively reach smaller cities, organizing workshops. AMFI's B-30 scheme encourages investments.

Embracing Riskier Assets

Investors in smaller cities are increasingly open to riskier assets, like equity mutual funds.

Technological Advancements

Widespread smartphone use enables convenient access to mutual fund management, breaking geographical barriers.

Brand Trust

Established houses leverage brand trust, using initiatives like virtual relationship manager channels.

Industry Implications

Diversified Investor Base

Expansion beyond metros diversifies investor base, reducing reliance on large cities and enhancing resilience.

Enhanced Market Reach

Penetration into smaller towns broadens the market reach, potentially doubling or tripling the investor base.

Inclusive Financial Development

Smaller towns' participation promotes financial inclusion, contributing to overall financial development.