Sebi efforts bear fruit as MFs start making inroads into B-15 cities

Equity assets in B-15 cities almost doubled from March 2013 to December 2014, while the MF industry also saw an increase of 27 lakh folios from semi-urban and rural areas.

Investor awareness programmes, coupled with adoption of districts and steps to re-energise the MF industry by Sebi, have resulted in higher participation from beyond the top-15 (B-15) cities.

According to HN Sinor, CEO of Association of Mutual Funds in India (Amfi), equity assets (which include equity schemes, equity linked saving scheme and balanced schemes) of B-15 cities in March 2013 stood at R65,000 crore and almost touched R1.3 lakh crore in December 2014.

“One can argue it is because of the rise in equity markets, but the markets rose by over 40%, while equity assets from B-15 cities have almost doubled. I think efforts of AMCs to reach out to B-15 cities and steps by the market regulator have helped us to penetrate beyond top-15 cities,” added Sinor.

Folios from B-15 cities, which stood at approximately 1.83 crore in March 2013, increased to around 2.10 crore in December 2014. The Indian MF industry was seen as focusing more on top-15 cities (T-15 cities), but things started to change after Sebi, in September 2012, allowed MFs to charge additional expense ratio (TER) up to 30 bps (100 bps =1%) if they were able to garner either 30% of their gross inflows, or 15% of average assets under management (whichever is higher) from beyond top-15 cities.

Steps taken by Sebi incentivised fund houses to look beyond top-15 cities and focus more on the hinterland.

“We normally do over 1000 investors awareness programmes per month. Again, after March 2013, around 75-80% of such programmes were conducted in B-15 cities and that also helped the industry,” said Sinor.

Sebi had also asked fund houses to set apart 2 bps for investor education and awareness initiatives. Adoption programmes by fund houses also helped. Mutual fund houses have adopted around 188 districts across the country for the Financial Literacy Campaign. For example, HDFC MF has adopted 12 districts, such as Hamirpur, Alwar and Mehsana, among others.

Milind Barve, MD at HDFC MF, says: “Growth from B-15 cities has been phenomenal in the last few years, especially after Sebi’s initiative. The equity market rally in the past few months also helped the industry to get more investors from B-15 cities. I think we will continue to see good amount of participation from investors going forward as equity is still under-penetrated in our country.”