As the mutual fund industry’s assets swell, a relatively less-appreciated aspect is the contribution of smaller cities and towns in this growth story.

For perspective, while the overall industry’s assets under management (AUM) grew 38.2 per cent year-on-year to nearly ₹55-lakh crore as of February, AUM at B30 locations rose three percentage points faster, at 41 per cent, to nearly ₹10-lakh crore.

B30 or beyond 30 refers to the locations beyond T30 or the top 30 locations in India in the context of generating AUM for mutual funds.

As a percentage of total assets, B30 cities and towns now account for 18 per cent of the overall pie (as of February), up from 17 per cent last year.

Here’s more on how the hinterland is pushing the boundaries when it comes to investing in mutual funds.

Smaller cities

From December 2020 to February 2024, the AUM of B30 locations doubled to about ₹10-lakh crore, while in T30 cities, assets increased by just 73.1 per cent to around ₹45-lakh crore.

Another interesting aspect to note is that between December 2020 and December 2023, the share of AUM from locations beyond the top 15 cities increased from 29 per cent to 35 per cent, indicating the rising participation in relatively smaller locations. For perspective, the share of the top two cities — Mumbai and Delhi — in the overall AUM fell from 46 per cent to 40 per cent over the same period.

Top States

Drilling down further, it is interesting to note the growth in AUM from specific States.

In the last one year, Madhya Pradesh, Uttar Pradesh and Rajasthan — States likely to have a larger number of tier-2,-3 cities — have had the fastest rise in AUM.

Assets from these States rose 41-42.4 per cent year-on-year as of February. Tamil Nadu, with 40.6 per cent rise in AUM, and Karnataka with 34.3 per cent are the others in the top five States in terms of growth.

Interestingly, AUM from Uttar Pradesh and Tamil Nadu are almost the same at ₹2.5-lakh crore as of February. The former saw AUM grow at 20.7 per cent annually over the last five years, while the latter’s assets rose at 17.7 per cent.

Preference for equity MFs

Thanks to rising equity markets over the past few years, nearly 83 per cent of the AUM of B30 locations pertains to investments in equity-oriented schemes as of February. The proportion was 79 per cent in February 2023.

While this is welcome in the sense that more participation from the hinterland is desirable to wean away investments from unproductive assets, care must be exercised by investors while making their choices. It would be better to take the help of registered investment advisers or mutual fund distributors to take informed calls to avoid serious investment mistakes.

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