Investment surge driven by Bharat's mutual funds market

Investment surge driven by Bharat's mutual funds market

In a notable shift, smaller cities across India have witnessed significantly robust growth in mutual fund investments in the post-Covid period, with some areas experiencing faster growth compared to established large locations.

1. Increasing Mutual Fund Inflows and AUM Growth in Smaller Cities

A comprehensive study on mutual fund inflows and Assets Under Management (AUM) growth across Indian cities from 2014 to 2024 reveals that tier-2 and tier-3 cities have been steadily increasing their contribution to mutual fund inflows post-Covid. This broadening investor base beyond traditional big cities is a clear indication of the democratization of investment.

1. Shift in Investor Behavior and SIP Holding Periods

According to recent mutual fund data, the pattern of Systematic Investment Plans (SIPs) held for long durations (over five years) is nearly identical between top 30 cities and smaller towns, indicating similar and sustained investor confidence and participation in smaller locations over time.

1. Factors Contributing to Growth in Smaller Cities and Towns
2. Digital penetration and awareness: Enhanced internet access and mobile penetration have enabled investors in smaller towns to participate in mutual funds more easily.
3. Financial literacy initiatives: Post-Covid, there have been focused efforts by financial institutions and regulators to raise awareness about mutual funds in non-metro areas.
4. Convenience of SIPs and lower ticket sizes: Systematic Investment Plans allow smaller, affordable monthly investments, appealing to retail investors in smaller towns with comparatively lower incomes.
5. Rise of digital platforms and distributors: Technology-driven platforms provide easy access, transparency, and advisory services to investors in smaller cities.
6. Changing mindset: Increased risk appetite and the search for better returns than traditional savings post-Covid have encouraged diversified investments into equity mutual funds from all regions.
7. Comparison with Large Established Locations

While large metros still dominate the highest absolute mutual fund inflows and AUM, the rate of growth in inflows from smaller cities has outpaced that of large cities, reflecting a democratization of investment across geographies. Large cities have also seen continuous inflows, but their growth is on a larger base and somewhat steadier.

1. Overall Industry Growth Post-Covid

The mutual fund industry saw a surge in AUM and inflows in the post-Covid period, with the first half of 2025 showing significant increases in AUM driven by both fresh investments and market appreciation. These gains are being contributed to by investors across city tiers.

In conclusion, mutual fund investments in smaller cities and towns have grown rapidly post-Covid, catching up and in some measures surpassing growth rates seen in large cities. This is driven by digital access, awareness, easier investment methods like SIPs, and changing investor behavior spreading beyond metropolitan hubs.

As of June 2025, 86% of the AUM in B30 locations comprises equity-oriented schemes, while the corresponding figure for T30 cities is 54%. States such as Uttar Pradesh and Rajasthan have grown at comfortably higher than 25% compounded annually over the past five years. Assets from T30 cities grew about 79.4% in the last two and a half years, while the AUM from B30 locations doubled over the same period.

1. The growth in mutual fund investments in smaller cities of India in the post-Covid period is marked by a consistent increase in their contribution to mutual fund inflows and Assets Under Management (AUM), as observed in a study from 2014 to 2024.
2. A similar pattern of Systematic Investment Plan (SIP) holding periods for over five years has been noticed between top 30 cities and smaller towns, evident in recent mutual fund data.
3. Digital penetration, financial literacy initiatives, the convenience of SIPs, rise of digital platforms, changing investor mindset, and increased risk appetite are key factors contributing to this growth in smaller cities and towns.
4. While large metros still maintain a lead in the highest absolute mutual fund inflows and AUM, the rate of growth in inflows from smaller cities has outpaced that of large cities, indicting a trend of investment democratization across geographies.
5. The mutual fund industry has experienced a surge in AUM and inflows in the post-Covid period, with significant increases in AUM in the first half of 2025 from investors across city tiers.

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