Mutual fund investments are subject to market risks. But when it comes to business, Gujaratis have always been inclined towards taking risks. This tendency remained intact amid volatility and lower return in equity markets as Gujaratis increased their investments in mutual fund by Rs9,833 crore. However, it still lags behind growth in bank deposits.
According to the official data of Association of Mutual Funds of India (AMFI) — as on September 2013 — total assets under management (AUM) from Gujarat stood at Rs46,396 crore compared to Rs36,582 crore in September 2011.
“There is a steady increase in mutual fund investments from Gujarat. The investment objective may have changed from pure equity to a debt -oriented scheme. However, awareness about the investment in mutual funds is definitely there and increasing,” said the regional head of a large mutual fund.
Despite the huge figure, Gujarat’s contribution is quite minuscule — just 5.74% — compared to the total AUM of the country — Rs8.08 lakh crore. Top five cities — Mumbai, Delhi, Bangalore, Kolkata and Chennai — contribute around 73.55% of the total investment in this passive mode of investment in the securities market.
Similarly, Ahmedabad emerged as the largest investor in mutual funds from Gujarat. The city has a total investment of Rs28,755 crore or 62% of total AUM. It is followed by Vadodara (Rs4,917 crore), Surat (Rs4,347 crore) and Rajkot (Rs1,996 crore) as on September 2013.
“Penetration of mutual fund is still less, but there is an increasing trend from direct investment in equities to putting the money in mutual funds. Systematic Investment Plans (SIP) that allows people to invest money in installments is one of the reasons why investors from smaller towns are also attracted. History has also suggested that even in volatile environment mutual funds were able to deliver better return to investors compared to taking a risk of direct investment,” industry official added.
Other than four large cities of Gujarat, 10 small towns from Gujarat also featured in the top-100 list of highest investment in mutual fund as compiled by the AMFI. Except Surat and Jamnagar where AUMs have declined showing redemption by investors, all other cities have shown a steady increase in AUM between 2011 and 2013.
However, it should be noted that mutual fund industry has a long way to go as compared to traditional savings or investment products. For example: bank deposits in Gujarat stood at Rs3.93 lakh crore and the same saw an increase of Rs1.01 lakh crore in the last two years. For safe, liquid although a lower return, people still prefer bank deposits over mutual fund investment are not immune to market risks.