In the hinterland, they are ready to SIP but want more

ET Intelligence Group: The hinterland of India are slowly but steadily catching up with the stock market's rally , show latest data from the Association of Mutual Funds of India (AMFI). Assets under management (AUMs), a barometer for rise or fall in investments in mutual funds, grew more than 50% in Bihar, Chhattisgarh, Jammu & Kashmir(J&K), Jharkhand, Madhya Pradesh, and Uttarakhand in FY17 compared with FY16.

The total AUM of mutual funds increased by 37% YoY to Rs 18.6 lakh crore at the end of March 2017. Small states & Union territories such as Andaman and Nicobar, Meghalaya and Sikkim reported more than 100% growth in AUMs albeit on a low base. AUMs in Bihar, J&K, and Jharkhand were Rs 9,757 crore, Rs 1,500 crore, and Rs 10,749 crore, respectively. Their allocation to equity was significant at 65%, 67% and 72% in that order.

Falling interest rates on bank fixed deposits is one of the major reasons for the growing popularity of mutual funds in smaller towns.Vidya Bala, head of MF research at FundsIndia, said that first time investors in these regions contributed 60-70% to mutual fund flows.

Rising focus of mutual funds on such regions is another reason for their increasing presence. A Balasubramanian, CEO, Birla Sun Life, said that mutual funds are investing up to 2 basis points of the total AUMs to improve awareness in hinterland about mutual fund investments. A better incentive for distributors in smaller towns is also helping.