States and Union Territories beyond top 10 witness a steady surge in investments in mutual funds: ICRA Analytics

In terms of contribution to AAUM, the top five states accounted for nearly 68.46 percent of the total AAUM of Rs 52.89 lakh crore in January 2024, marginally down from a contribution of 69.43 percent in January 2023. 

Interestingly, the smaller states and Union Territories beyond the top 10 states have been witnessing a steady surge in investments into mutual funds, data compiled by ICRA Analytics, a wholly owned subsidiary of ICRA Ltd, suggests.

Maharashtra’s AAUM stood at Rs 21.69 lakh crore in January 2024, up from Rs 17.14 lakh crore in January 2023, a growth of around 27 percent; New Delhi at Rs 4.52 lakh crore, Karnataka at Rs 3.65 lakh crore and Gujarat at Rs 3.61 lakh crore AAUM each grew by 30 percent year-on-year while West Bengal at Rs 2.74 lakh crore grew by 28 percent, ICRA Analytics said.

The top 10 states accounted for nearly 87 percent of the total AAUM with the remaining states and union territories accounting for around 13 percent.

Tamil Nadu witnessed a 34 percent growth in AAUM at Rs 2.41 lakh crore; Uttar Pradesh saw a 37 percent rise at Rs 2.42 lakh crore; Rajasthan a 38 percent increase at Rs 96,619 crore while Madhya Pradesh saw a 39 percent surge at Rs 81,388 crore.

However, the smaller states and union territories beyond the top 10 states have been witnessing a steady surge in investments into mutual funds as ICRA Analytics’ data suggests.

For instance, Pondicherry registered 31 percent growth in AAUM at Rs 31, 93 crore in January 2024; Tripura posted 38 percent growth at Rs 2053 crore while Sikkim saw 30 per cent growth at Rs 1780 crore.

Manipur witnessed a whooping 414 percent surge in AAUM in January 2024 at Rs 3726 crore while Lakshadweep registered a 998 percent increase at Rs 169 crore.

According to Ashwini Kumar, Head Market Data, ICRA Analytics, mutual fund penetration has been steadily improving in smaller towns and cities backed by increasing awareness among people, the growing interest among retail investors for investing in equities through the mutual fund route, and the opening up of branches of AMCs (asset management companies) beyond the top 30 towns.

The burgeoning middle class and rising financial literacy are prompting more and more people to resort to financial planning to accrue savings, particularly through the SIP (Systematic Investment Plan) route.     

“The country’s strong macroeconomic fundamentals and resilient earnings growth have been aiding positive market sentiments and encouraging more retail investors to invest in equities, primarily through the SIP route.

"The participation of retail investors from smaller towns and cities has been steadily increasing backed by rising awareness and financial literacy and access to products and services due to the increasing reach and penetration of AMCs. This, in turn, has led to a steady increase in the AAUM from states and union territories beyond the top 10,” Kumar said.

In terms of existing penetration, the per capita penetration in Maharashtra is highest at Rs 1,69,300, with its Average Assets under Management (AAUM) accounting for nearly 77 percent of the GDP while it is lowest in Manipur at Rs 3,270 accounting for 3 percent of GDP.

The number of AMC branches in Maharashtra is 246 while that in Manipur stands at 1.