Small investors rush to invest in equities

Retail participation in mutual funds from beyond the top 15 cities in the country has increased remarkably in the past 18 months, due to joint efforts made by the MF houses and stock market regulator Sebi, says AMFI.

The MF industry's assets under management (AUM) crossed Rs 107,000 crore (Rs 1.07 trillion) from retail investors living in places beyond the top 15 cities as on October 31.

It was a 33 per cent growth over 18-month. As on March 31, 2013 the AUM was Rs 65,000 crore (Rs 650 billion), according the Association of Mutual Funds in India.

The AUM relate to equities, equity-linked saving schemes (ELSS) and the balanced funds which essentially involves retail participation, the industry body said.

"We have crossed the Rs 1 lakh crore (Rs 1 trillion) mark in AUM from beyond 15 cities during past 18 months after we started the journey to reach retail equity investors living in 400 centres located in Tier-II and Tier-III cities, beyond the top 15 cities of the country," AMFI chief executive H N Sinor told PTI.

"This is a major indication of increased retail participation in equities," he added.

"While we have achieved 20 per cent of overall retail participation, we have also been able to mobilise 10 per cent of overall AUM from 400 centres which are located beyond top 15 cities of the country comprising semi-urban and even rural areas," he said.

After the global slump of 2008, stock market regulator Sebi had come up with guidelines to re-energise the mutual fund industry.

These guidelines had allowed the industry to take additional 30 basis points of already existing expense ratio which could be used to incentivise distributors across slabs to give a push to sales of mutual fund products.

Asset management companies (AMC) are allowed to keep aside 2.5 per cent of their AUM as fee in case their AUM is less than Rs 100 crore (Rs 1 billion). The fee is decreased to 2 per cent if AUM goes up to Rs 300 crore (Rs 3 billion) and 1.75 per cent in case the AUM goes beyond Rs 300 crore.

However, since April 2013, Securities and Exchange Board of India has allowed them to charge 50 basis points additional amount in the form of management fee in each of the slabs which they can use to incentivise their agents so that they could increase their penetration in Tier-II and Tier-III cities.

Secondly, it has allowed MF houses to use two basis points of their AUM for creation of awareness among investors. Thirdly, market conditions have improved helping achieve such a result, as per AMFI.

Besides, mutual fund houses adopted several districts on a voluntary basis which also attracted investors from smaller towns towards mutual funds.

"So far, we have adopted 187 districts across the country. While large mutual funds have adopted around ten districts, medium mutual fund houses have adopted around five districts and small mutual fund houses adopted two districts on their own," Sinor said.

"It all has helped the industry increase the number of folios to 2.04 crore (20.4 million) as against 1.83 crore (18.3 millin) folios it had received in March, 2013 which shows an increase of 20 lakh (2 million) folios during past 18 months," he added.