What states have seen the fastest growth in mutual fund assets?

Uttar Pradesh, Rajasthan, and Madhya Pradesh have seen their mutual fund assets grow at a faster pace than traditional financial hubs like Tamil Nadu and Kerala.

What factors have contributed to the rise of mutual fund investments in India's smaller cities?

Increased awareness, digital onboarding, financial inclusion, and incentives for distributors have all aided the growth of mutual fund investments in smaller cities and towns.

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Smaller Cities Outpace Metros in Mutual Fund Investments

Q: How do the investment patterns differ between smaller cities and top cities?

Smaller cities and towns have a much higher proportion of equity-oriented funds, accounting for 83-90% of their overall mutual fund AUM, compared to 62-71% in top cities.

9 Aug

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Summary

Mutual fund assets in smaller cities grew faster than top cities
Uttar Pradesh surpasses Tamil Nadu in mutual fund AUM
86% of AUM in smaller cities is in equity-oriented schemes

Smaller Cities Outpace Metros in Mutual Fund Investments

As of June 2025, the mutual fund industry in India has seen a remarkable shift in investment patterns, with smaller cities and towns emerging as the new growth centers. While the top 30 cities (T30) have witnessed a 23% compounded annual growth rate in assets under management (AUM) over the last five years, the growth rate for the remaining 'beyond top 30' (B30) cities has been an impressive 28%.

This trend is particularly notable in relatively less prosperous states. For instance, Uttar Pradesh has now edged past Tamil Nadu in mutual fund assets, with ₹3.51 lakh crore compared to Tamil Nadu's ₹3.39 lakh crore. Similarly, Rajasthan has surpassed Telangana, and Madhya Pradesh is ahead of Kerala in terms of mutual fund AUM.

The increasing penetration of mutual funds in these smaller cities and towns can be attributed to several factors, including greater awareness of investment options, the prevalence of digital applications for easy onboarding, and improved financial inclusion through banking access. Additionally, the incentive structure for distributors to gather assets from B30 locations has also contributed to this growth.

Interestingly, the investment patterns in these emerging markets also differ from the top cities. States like Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, and Jharkhand have a much higher proportion of equity-oriented funds, accounting for 83-90% of their overall AUM. In contrast, the equity fund mix in Karnataka, Tamil Nadu, Haryana, and Gujarat is relatively lower, at 62-71%.

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