Small, low-income investors are betting big on stocks; semi-urban influx on the rise

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People with incomes of up to Rs 5 lakh account for 1.3 crore of investor accounts, or 70.01% of total individual investors across the country, until October 31, according to data from the Securities and Exchange Board of India (Sebi). This set of investors, however, had Rs 9.16 lakh crore, or 28.54 percent of the total assets under management (AUM) of the mutual fund industry.

If those in the income bracket of Rs 5-10 lakh are added, then the total of investors in the income bracket up to Rs 10 lakh increases to 1.65 crore, or 89.29% of all investors individual.

On the other hand, India had only 1,35,691 investors in the income bracket above Rs 1 crore and they accounted for 30.94% of the industry’s AUM. According to data from the Income Tax Department, 97,695 people had a total gross income of Rs 1 crore and more in 2018-19.

Mutual fund industry insiders say there has been a surge in new investor inflows from small towns and semi-urban areas over the past 15 months. Data shows that the number of systematic investment plan (SIP) accounts increased from 3.12 crore in March 2020 to 4.78 crore in November 2021, with an increase of over 53%.

Even demat accounts have seen a big increase over the same period. Investor accounts with Central Depository Services Limited (CDSL) increased 148% from 2.12 crore in March 2020 to 5.26 crore in November 2021.

The influx of investors has been in line with the sharp rise in stock markets over the past 18 months, when the benchmark Sensex rose from 29,468 in March 2020 to a high of over 62,000 in October 2021 The 30-stock index closed at 57,788 on Wednesday, December 15th.

While brokers and mutual fund industry insiders say there has been a large influx of retail investors from small towns and semi-urban areas, AUM data released by the Association of India mutual funds (Amfi) show that the share of “other cities” (those beyond the top 110 cities) in the AUM industry has increased from 10.21 percent in June 2020 to 16.09 percent during the quarter ended September 2021. During the same period, the share of the top 5 cities in the AUM industry increased from 63.88 percent to 55.97 percent.

In recent years, there has been a significant increase in investment in B-30 cities mutual funds (those outside the top 30 cities) as their AUM has increased by 86% from Rs 3, 48 lakh crore in 2019-2020 at 6.46. lakh crore in October 2021. During the same period, the total industry AUM increased by 68%.

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