Mutual fund assets swell by 145% from 2020 in the northeast

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The average net assets under management (AAUM) of the northeastern States has grown by nearly 145% from the 2020 level, an analysis of investments in mutual funds (MF) has revealed.

MF investments rose from ₹16,446 crore in March 2020 to ₹40,324 crore in March 2024, indicating a growing appetite among investors from smaller towns and cities, the study by ICRA Analytics said.

The share of the northeastern States increased to 0.73% of the total AAUM of the MF industry, which stood at ₹55.01 lakh crore in March 2024, up from around 0.67% in March 2020, when the industry’s AAUM stood at ₹24.71 lakh crore.

“Although the contribution of the northeastern region to the total AAUM of the industry is still small in percentage terms, there has been a steady and consistent growth in MF inflows in these States backed by increasing awareness among people and the growing interest among retail investors for investing in equities through the MF route,” ICRA Analytics’ senior vice president and head of market data, Ashwini Kumar, said on Monday.

With an AAUM of ₹29,268 crore, Assam was the leading contributor in the northeast, accounting for nearly 73% of the total investment in March 2024. The AAUM of Assam grew by almost 159% in the last five years, up from ₹11,298 crore in March 2020.

Meghalaya accounted for 9% of the total AAUM at ₹3,623 crore in March 2024, clocking a 111% growth of over ₹1,714 crore in March 2020.

The other States in the order of investment size are Tripura with 5% at ₹2,174 crore (₹1,155 crore in March 2020), Nagaland with 4% at ₹1,668 crore (₹965 crore in March 2020); Arunachal Pradesh with 3.8% at ₹1,532 crore (₹525 crore in March 2020), Manipur with 2.9% at ₹1,152 crore (₹403 crore in March 2020), and Mizoram with 2.25% at ₹907 crore (₹386 crore in March 2020), the data said.

“There has been a steady increase in awareness about the various investment options among people, primarily from smaller towns and cities. This, coupled with growing financial literacy and the surge in interest among retail investors for investing in equities through the MF route, all contribute to good growth in AAUM in towns and cities beyond the top 30,” Mr. Kumar said.

Investor awareness campaigns conducted by asset management companies in the region have also helped build awareness among people, he added.

“However, the MF penetration continues to be low in the country and there is a lot of scope for growth. The burgeoning middle class and rising financial literacy will likely prompt more and more people to resort to financial planning to accrue savings. This is expected to shore up mutual fund investments in the northeastern States moving forward,” Mr. Kumar said.

Growth in net AUM

The Indian MF industry grew steadily in inflows across debt and equity-oriented schemes in April 2024. The net AUM (assets under management) of the industry, which registered a 35% growth in 2023-24, grew by nearly 38% on a year-on-year basis to touch ₹57.26 lakh crore in April 2024, as compared with ₹41.62 lakh crore in April 2023.

The net AUM grew sequentially by 7% compared with ₹53.40 lakh crore in March 2024. Net inflows surged by 97% at ₹2.39 lakh crore, as against ₹1.21 lakh crore in April 2023.

Net inflows into debt-oriented schemes under the open-ended category grew by 78% at ₹1.90 lakh crore in April 2024, up from ₹1.07 lakh crore in 2023. “The Reserve Bank of India’s stance to maintain the status quo on policy rates for the next one or two quarters is likely to lead to some softness in yields in the near term. However, investors are likely to be a little watchful of the developments around election months and will keep a close watch on the global interest rates,” Mr. Kumar said.

Inflows into equity-oriented schemes increased by 192% at ₹18,917 crore (₹6,480 crore). Sectoral or thematic funds registered a 741% growth in inflows at ₹5,166 crore in April 2024, as against ₹614 crore in April 2023.

“The small-cap funds, which witnessed some correction on the back of the recent SEBI mandate requiring routine stress tests to be conducted and had registered net outflows to the tune of ₹94 crore in March 2024, registered net inflows of around ₹2,209 crore in April 2024,” Mr. Kumar said.

“We are of the view that the small and mid-cap funds will continue to hold investor interest in the medium to long term backed by the value created in the entities supported by robust regulatory framework leading to better corporate governance practices, and the government’s firm intent to push for an intrinsic growth in the country’s economy,” he said.