Markets regulator Securities and Exchange Board on Monday asked mutual funds to adopt different districts to increase their penetration.

“We are now asking mutual funds to select and adopt districts. This may help increase the penetration of mutual funds,” SEBI chairman UK Sinha told a regional conference on investor protection in capital markets here.

According to a Crisil report, quoting Amfi data, the top five cities contribute 74 per cent to the pie, with the remaining 26 per cent distributed among other cities.

SEBI is in discussions with asset management companies (AMCs) in this regard so that mutual fund schemes are spread among people in remote locations which in turn can enhance penetration of financial products.

Mutual funds lost 8 per cent or nearly 35 lakh retail folios over past six months ended September, as per data released by Association of Mutual Funds in India (AMFI).

This was the sixth consecutive half yearly decline in retail folios, as per AMFI data. At the overall level, including institutional and high net worth individuals’ folios), a gain in folios of high networth individuals capped the fall at 15 lakh folios. The industry currently has 4.13 crore folios, a Crisil note said last week.

The industry blamed retail folios decline on volatility in the equity market.

The sharp decline in retail folios was mainly in the equity category which has been impacted by the ongoing volatility in the segment. The Nifty has risen a meagre 1 per cent in the past six months and declined nearly 3 per cent in the calendar year until September 2013.

Macroeconomic weakness in the domestic market coupled with some mixed cues from the global market led to the decline in the local market. Balanced funds (an equity oriented hybrid category) too saw a decline of over 2 lakh retail folios over the past six months.

The mutual fund industry is yet to spread its reach beyond big cities, according to a June report by consultant PwC.

Keywords: MF penetrationSEBI

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