Equity cult on the rise in small states

An appetite for equity investments seems to have increased across the country.

The latest AMFI data on the geographical spread of mutual funds shows that investors are increasingly lapping up equity funds even in Sikkim, Arunachal Pradesh, Jharkhand and Odisha, and in Union territories such as Lakshadweep and Andaman and Nicobar Islands.

AMFI data shows that Sikkim recorded the highest growth,of 106%,in equity AUM in terms of percentage last fiscal. Equity AUM includes equity funds, balanced funds, and ETFs that track the indices.

Similarly, Arunachal Pradesh, Jharkhand and Odisharecorded over 60% growth in equity AUM in FY 2016-17.

Among Union territories, Lakshadweep and Andaman Nicobar witnessed the highest growth at 180% and 120%, respectively, in equity AUM last fiscal.

Experts attribute this to increasing awareness about mutual funds in such locations. “The MF industry has been putting untiring efforts to reach out to masses in small states and Union territories,” says Hemant Rustagi of Wiseinvest Advisors.

Ranchi-based Pradeep Jain, of PMPK Wealth Advisors feels that investors’ appetite for equity has been increasing due to the lacklustreperformance of other assets class. “No doubt, the investor awareness programmes conducted in these locationshave been yielding results. But the growth in equity assets is due to underperformance of physical assets like gold and real estate. In addition, many investors are looking at equities as post tax returns from bank fixed deposits are not attractive anymore,” he says.

However, in absolute terms, the contribution of states like Maharashtra and New Delhi are among the highest. While Maharashtra witnessed a growth of 46%, i.e., from Rs1.62 lakh crore to Rs2.36 lakh crore in its equity AUM, Delhi’s equity AUM increased from Rs42,089 crore to Rs60,385 crore, a growth of 43% over the past one year.

Similarly, Gujarat recorded growth of 55% as its equity AUM increased from Rs16,772crore in 2016 to Rs30,744 crore in 2017.

Though equity funds constituted the bulk, ETFs too are getting popular in these states and UTs.  Assets under equity ETFs in Maharashtra, New Delhi, and Gujarat rose by 132%, 150%, and 200%, respectively. Experts attributed this rise in equity ETFs to the investor demand for the further fund offering of the CPSE ETF, which remained open for subscription last fiscal.

Overall, the industry recorded 50% growth in equity AUM. AMFI data shows that industry added Rs2.13 lakh crore to its equity AUM to reach Rs6.50 lakh crore last fiscal.

State-wise growth in equity AUM in FY 2016-17

Source: AMFI