Which States to Focus on as an MFD?

 

The mutual fund industry's AUM has grown exponentially in the last decade, particularly for equity-oriented schemes. Equity mutual funds outpaced total AUM growth, reflecting a strong shift in investor mindset towards market-linked investments. With improving awareness, growing penetration into untapped regions, and technological advances, this trend is likely to continue in the coming years.

The Last 10 Years in the Context of India's Economic Growth:

India's GDP growth and rising disposable income provided a favourable backdrop for mutual fund investments. A booming stock market, favourable demographics (younger investors), and increasing digital penetration amplified mutual fund participation. Retail investors emerged as a significant contributor, with an increasing share of individual portfolios in mutual funds.

Monthly SIP inflows, which were around ₹1,000 crore a decade ago, have crossed ₹15,000 crore by 2023 Introduction and adoption of ETFs (Exchange Traded Funds) and Index Funds as cost-effective alternatives to active funds regulations, such as re-categorization of schemes and disclosure requirements, added transparency and confidence among investors.

"Growth/Equity Oriented Schemes" and "Total AUM."

Observations on 10-Year AUM Growth:

1. Overall Growth (2013–2023):
• The Total AUM for all states combined increased significantly from ₹10,70,348.06 crore in 2013 to ₹68,50,431.47 crore in 2024, marking a 6.4x growth.
• Growth/Equity Oriented Schemes showed substantial growth from ₹2,83,150.10 crore to ₹37,54,680.02 crore over the same period, reflecting increasing investor preference for equity schemes.
2. Top Performing States by AUM Contribution:
• Maharashtra dominates with the highest contribution at 40.72% of total AUM in October 2023, increasing from ₹5,01,088.70 crore (2013) to ₹27,89,304.65 crore (2023). Its AUM in equity schemes grew by ₹19,67,015.99 crore over 10 years.
• New Delhi (₹5,52,701.24 crore total AUM in 2023) and Gujarat (₹4,82,585.12 crore) follow, with consistent growth across the decade.
3. States with the Most Significant 10-Year Growth in Equity AUM (Absolute):
• Maharashtra led in absolute equity AUM growth with ₹19.67 lakh crore growth in 10 years.
• Karnataka experienced strong growth in equity-oriented schemes, increasing by ₹2.99 lakh crore (14.24x growth from ₹20,395.99 crore in 2013 to ₹3,03,023.84 crore in 2023).
• Gujarat saw equity-oriented schemes grow by ₹2.91 lakh crore, reflecting an increasing base of retail and institutional investors.
4. States with the Most Significant Percentage Growth in Equity AUM:
• Nagaland and Arunachal Pradesh grew impressively in percentage terms, with 35.45x and 32.05x growth, respectively, albeit from lower bases (₹85.22 crore and ₹59.83 crore in 2013, respectively).
• Smaller states like Tripura, Meghalaya, and Manipur also demonstrated exponential percentage growth, indicating improved penetration of equity investments in previously underrepresented regions.
5. Consistently High Growth States:
• Karnataka, West Bengal, Tamil Nadu, and Telangana experienced steady AUM growth over the last decade, with significant increases in both equity and total AUM categories.
6. Smaller States and Union Territories:
• UTs like Chandigarh and Puducherry showed strong percentage growth despite their smaller contributions. Chandigarh's total AUM grew 4.97x, while Puducherry saw a 9.64x increase.
7. Lagging States:
• Lakshadweep showed minimal growth in absolute terms, with total AUM increasing from ₹1.34 crore in 2013 to ₹58.63 crore in 2023.

Key Highlights:

• Biggest Contributor: Maharashtra remains the leader in AUM growth, contributing the lion’s share (40.72% of total AUM in 2023).
• Emerging States: States like Karnataka, Telangana, and Kerala showed consistent development in AUM, indicating expanding financial literacy and market penetration.
• High Percentage Growth Leaders: Northeastern states (e.g., Nagaland, Arunachal Pradesh) and smaller states with lower AUM bases experienced the highest relative growth, reflecting better outreach and inclusion.

Conclusion:

Equity schemes' contribution to total AUM rose significantly from 26.5% in 2013 to 54.8% in 2023, showing a shift in investor preference towards growth-oriented asset classes.

Total AUM Growth (2013–2023):

• 2013: Total AUM of Indian mutual funds was ₹10,70,348.06 crore.
• 2023: Total AUM rose to ₹68,50,431.47 crore.
• Absolute Growth: ₹57,80,083.41 crore.
• Percentage Growth: ~540% (or 6.4x growth) over 10 years.
• Annualized Growth Rate: Approximately 19.3% CAGR.

Key Factors Driving Total AUM Growth:

• Rising investor participation in mutual funds, particularly in Tier II and Tier III cities.
• Initiatives like the "Mutual Funds Sahi Hai" campaign to educate investors.
• Steady increase in SIP (Systematic Investment Plan) contributions, which reached all-time highs in recent years.
• The introduction of new products catering to various risk profiles.

  Growth of Equity-Oriented Mutual Funds (2013–2023):

• 2013: Equity-oriented schemes AUM was ₹2,83,150.10 crore.
• 2023: Equity-oriented schemes AUM increased to ₹37,54,680.02 crore.
• Absolute Growth: ₹34,71,529.92 crore.
• Percentage Growth: ~1,226% (or 13.26x growth) over 10 years.
• Annualized Growth Rate: Approximately 27.5% CAGR.

 While Maharashtra continues to dominate in absolute terms, smaller and emerging states like Nagaland, Arunachal Pradesh, and Meghalaya highlight significant financial inclusion and market expansion improvements. States such as Karnataka and Gujarat have also strengthened their positions as key contributors to India’s mutual fund growth over the past decade.

This is one of the best times to become a financial advisor since over the last 10 years the growth path for the strong foundation of the Industry has been laid out. Further Tier 2  and 3 cities' maturity leads to a wide opportunity for quality MFDS to drive and grow business. The growth of MSME segments leads to a wide opportunity growth for the MFDs. The biggest contributor to the opportunities is the maturity of the markets in tier 2 and 3 cities, low living costs, excessive surplus and the young age of investors. The growth of the Indian GDP has a direct relationship with savings growth and income growth of India.  This will lead to more investments in financial products. Further traditional investment options are losing their grip which leads to more demand for financial advisors.