Over 50% new investor folios come from smaller cities: Zerodha Mutual Fund

The number of new investor folios coming from smaller cities has been rising on a monthly basis. The mutual fund industry has added 2.3 crore investors folios from April to August 2024 of which more than 50% are from smaller cities.

Such trends can foster a culture of saving and investing, and ultimately contribute to long-term industry growth, according to a study by Zerodha Fund House.

However, smaller cities still account for only 19% of the overall assets under management (AUM) of the mutual fund industry. 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 centres. These smaller cities are classified as B-30 cities (Beyond the top 30 cities) by the Association of Mutual Funds of India (AMFI).

As of August 2024, about 54% of all the SIP accounts in the mutual fund industry are contributed by SIPs from smaller cities. Smaller cities have a larger number of SIP accounts reflecting greater penetration in less urbanized areas, said the study.

From April to August 2024, the growth rate in the SIP accounts in smaller cities for Index Funds (18.7%) is higher than the growth rate of any other category in the industry. Altogether, about 79% of the SIP accounts from smaller cities are contributed by growth/equity-oriented schemes.

The rise of smartphone apps, direct investment platforms, digital payment systems, and industry initiatives has led to more than 50% of all the new investor folios in smaller cities to invest through direct plans.

“I strongly believe that simple, transparent & affordable products will help individual investors design better financial futures. Index-based products exhibit all these qualities and I’m heartened to see their growing trend in smaller cities and towns,” said Vishal Jain, CEO of Zerodha Fund House.

The average ticket size of the retail segment in smaller cities is about Rs 1.13 lakh while the combined average ticket size of the retail segment for (T30+B30) cities is about Rs 2.04 lakh.