The rise in stock markets over the last 15 months has seen an unprecedented surge in retail investors from small towns and semi-urban areas. If the rich and upwardly mobile in these areas were already investing in stocks and mutual funds, they have been joined by more and more investors from the lower income brackets. Sebi data show that individuals with income up to Rs 5 lakh account for 1.3 crore investor accounts, or 70.01% of individual investors across the country, and 28.54% of the total assets under management (AUM) of the mutual fund industry. Those earning up to Rs 10 lakh accounted for 1.65 crore investor accounts (89.29%) and 47.2% of the industry AUM.
By comparison, there were only 1,35,691 investors in the income bracket of over Rs 1 crore as of October 31, 2021. They, however, held 30.94% of the MF industry AUM.
The growing low-income investor fraternity has been investing in stocks directly and through mutual fund systematic investment plans. Experts feel they need to be handheld in times of volatility and market correction, especially since they have only witnessed a big market rally over the last 15-18 months.
How has this category grown?
As Sebi data show, almost 90% of MF investment is from those in the income bracket up to Rs 10 lakh. Their share, already high, has grown over the last 15-18 months in line with the rise in equity markets, insiders say. The benchmark Sensex jumped from 29,468 in March 2020 to a high of over 62,000 in October 2021.
Data from Association of Mutual Funds in India show that the number of SIP accounts has jumped over 53% from 3.12 crore in March 2020 to 4.78 crore in November 2021.
Even demat accounts with Central Depository Services Ltd have jumped 148% from 2.12 crore in March 2020 to 5.26 crore.
AMFI data further show that the share of “other cities” (those beyond top 110 cities) in the industry AUM has risen from 10.21% in June 2020 to 16.09% in the quarter ended September 2021, while the share of the top 5 cities has come down from 63.88% to 55.97%.
So, who is investing and why?
Industry insiders say there has been an increasing participation from small cities such as Gangtok, Tezpur, Vellore, Srinagar and even from semi-urban towns and rural areas. Many small investors earning less than Rs 5 lakh a year are now entering the equity markets, starting with SIPs of Rs 500, 1,000 or 2,000.
Apart from the rise in equity markets and ease of investment, experts say falling interest rates on fixed deposits and high cost of real estate investing are other factors that are attracting investors.