It wasn’t just another branch opening. It marked the mutual fund industry’s first physical foothold at such an altitude—a watershed moment, and an acknowledgement of the growing appetite for financial assets among India’s smaller, remote towns.
For Sapal Dorjee, 53, a smallbusiness owner based in Leh, this is a journey he has lived through firsthand. Starting a monthly systematic investment plan (SIP) of just Rs.2,000 in 2000, Dorjee has persisted and gradually hiked his SIP commitments. He now invests Rs.1 lakh monthly towards meeting his goal of amassing Rs.3-4 crore by age 60. “I was among those who preferred the safety of bank fixed deposits, but came to realise the wealth creation power with long-term investing through equity mutual funds,” Dorjee asserts.
India’s equity cult is no longer confined to its bustling urban metropolises. Its aspirational hinterlands are experiencing a cultural shift—emerging as keen participants in wealth creation rather than just spectators from afar. From the high-altitude valleys of Ladakh to the far-eastern industrial corridor of Tinsukia, Assam, and the lush landscapes of Nagercoil, Tamil Nadu, near the southernmost tip of the Indian peninsula, this tribe of investors is growing fast.
It’s a transformative shift, but the road ahead is long. Wealth creation is reaching the last mile, yet the link remains fragile.
Beyond top 30 cities now account for fourth of MF assets
Financialisation of savings is now evident in smaller towns
B30 investors base is growing at a faster clip
Smaller cities now account for 58% of investors
Stepping out of the comfort zone
Smaller towns are gradually shedding their affinity for real estate and precious metals. It is evident in the surge in demat accounts and mutual fund folios in recent years. Demat accounts crossed 216 million in December 2025, with the majority of growth coming from non-metro areas, according to National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). As of February 2026, investors from beyond the top 30 cities (B30) now account for 27.6% of total individual mutual fund assets, according to the Association of Mutual Funds in India (Amfi). Over the past five years (up to August 2025), assets from B30 locations grew at a compounded annual growth rate (CAGR) of 28%, outpacing the 23% CAGR of T30 cities. SIP volumes from B30 locations now exceed T30, with 56% of new registrations coming from these areas.
Nilesh Shah, MD and CEO, Kotak Mahindra Mutual Fund, observes, “Traditionally dominated by physical assets like land and gold, the culture is steadily shifting towards financial instruments.” This is not a temporary shift, insists Dinesh Thakkar, MD, AngelOne. “It feels like a structural change in how the next set of investors is coming in. They are no longer approaching markets with a shortterm mindset; the focus is shifting towards building long-term wealth for clear goals like buying a home, funding education, or achieving financial independence.”
Technology has been the biggest enabler behind this shift. “Digital execution and Aadhaar-based KYC (Know Your Customer) have eliminated earlier barriers, making investing seamless even in smaller towns,” remarks Kotak MF’s Shah. Fintech platforms have led the way in driving adoption among tech-savvy younger investors from small towns. Thakkar observes, “Investors in Tier-2/3 cities today are younger, digitally proficient, and social media-savvy. Due to easy access to information and digital platforms, they are far more market-aware than they are often given credit for.”
Prashant Shah, CEO & Co-founder, Definedge Securities, says, “Fintech platforms have fundamentally transformed market access for small-town investors. What once required branch visits and paperwork now happens in minutes on a smartphone.” Further, innovations such as zerobrokerage models, vernacular interfaces, and low-ticket SIPs have removed cost, language, and access barriers, he adds.
What sets them apart
The investment priorities and mindset in India’s Tier-2/3 cities differ from those in its larger cities in many ways, driven by distinct circumstances and financial journeys. Shah of Definedge Securities insists, “Small-town investors are in midtransition, moving from traditional assets toward financial assets, while relying on trust-led advice from local advisers. However, metro investors are post-transition, with more diversified portfolios and higher exposure to complex and global products.”
Aditya Shankar, Co-founder, Centricity WealthTech, says, “Compared to metro investors, who are more open to taking risks, small-town investors tend to rely more on trust and focus on long-term financial stability.” He points out that even as investors in smaller towns are becoming more aware of the markets, they remains cautious.
This may be partly explained by the erratic nature of income for many individuals. “The investing behaviour of Tier-2/3 investors is shaped by a fundamentally different source of wealth compared to metros. In smaller towns, episodic liquidity shapes a cautious but return-focused investor mindset,” contends Shah of Definedge Securities.
Amid the upheaval of Covid-19, content producer Nitin Nautiyal, now 48, moved back to his hometown, Dehradun, from New Delhi. He finds that the investing and spending habits of locals are distinct from those in big cities—incomes are lower, but they don’t enter the rat race and are comfortable with their standard of living. There is no widespread EMI (Equated Monthly Income) culture, even though the youth are now beginning to spend heavily. Nautiyal himself initially invested in property and shifted to mutual funds and unit-linked insurance plans (ULIPs) much later. However, he finds that the locals’ risk appetite remains modest. “Investment perspectives change a lot shaped by locality. Land parcels remain a popular investment avenue among locals.”
Investors’ outlay is also very nominal. Nearly a third of the investor base in B30 cities had assets less than Rs.10,000, while a fifth held assets between Rs.10,000 and Rs.50,000, as shown by data from a 2025 CAMS-CII report titled ‘B30 locations Performance & Potential’. Nearly 63% of investors held less than Rs.1 lakh in MF assets. This points to the entry of newer investors with smaller sums, not necessarily lower propensity for savings.
Experts suggest that the perception that investors from smaller towns and cities shy away from risk is not accurate. Ajay Kumar Yadav, Group CEO & CIO, Wise Finserv, insists ground reality is different. “Their relationship with risk is not conservative, but looks like it is thoughtful. Market volatility is acceptable. Permanent loss of capital is not. SIPs are preferred, and holding periods tend to be longer.” The growing popularity of SIPs reflects that most investors are comfortable starting small and investing regularly, as they are sensitive to losses, Shankar avers.
Investors in B30 cities tend to prefer equity- oriented schemes, whereas those in T30 cities lean towards diversified asset allocation. As of February 2026, equity-oriented schemes comprised 64.3% of overall AUM in B30 cities, compared to 38.3% in T30 cities, according to Amfi. “This tells us some thing important: Smaller-town investors are not avoiding equity. They are embracing it but on their own terms,” avers Yadav.
A bullish faith in Indian equities is evident among some investors. Amit Barvaliya, 45, runs a small business out of Savar Kundla, a small town in Gujarat’s Amreli district. Twenty years ago, he was first introduced to equity funds by a local bank relationship manager, who helped him initiate SIPs of ` 5,000 each in four equity funds.
A few years later, he met Anand Zinzuvadia, an Amreli-based MF distributor, who helped him avoid a costly mistake during the 2008 financial crisis. Intent on somestopping his ongoing SIPs and pulling out the money, Barvaliya was discouraged from doing so. The distributor’s advice was convincing enough for him to initiate more SIPs in that period. He has since added multiple SIPs, staying invested through multiple market cycles and is reaping the rewards today. Barvaliya asserts with conviction, “Teji mandi toh aati rahegi, lekin Bharat ki unnati pe bharosa hai (market ups and downs are inevitable, but confidence in India’s growth remains).”
A milieu of influences However, this journey towards wealth creation has hardly been linear. Lacking awareness and tempted by the prospect of instant riches, many investors have made costly mistakes. Nilesh Shah rues, “Many residents, lured by quick-money dreams, first entered speculative arenas — F&O trading, online gaming, and influencer-driven tips. Heavy losses served as expensive lessons.”
While digital execution is easy, a big gap in understanding remains. “Participation still lags awareness, financial literacy is limited, and many investors struggle with risk understanding. A lack of trust and a strong preference for guaranteed returns still hold many investors back from fully participating in the markets,” maintains Shankar.
Fintech platforms have improved access, but are not always nudging investors in the right direction. If investors are pushed to chase charttopping mutual funds, execute trades, or pursue the newest investment avenues, it can do a lot of harm to longterm financial well-being.
B30 investors invest modest sums
63% of investors hold less than Rs.1 lakh in MF assets.
Smaller cities are now running more SIPs
SIP volumes from B30 locations have surpassed T30 cities.
NITIN NAUTIYAL,
48 years, Dehradun (Uttarakhand) Content producer
- Shifted to Dehradun from New
- Delhi during Covid-19
- Initial investments in property in Delhi
- Started investing in mutual funds and ULIPs later
- Also bought land parcels in Dehradun
Note:Even though incomes in smaller towns are lower, they don’t enter the rat race and are comfortable with their standard of living.
Younger cohort form the bulk of B30 investors
20-30 age group investors is emerging as the fastest growing segment.
SAPAL DORJEE,
53 years, Leh (Ladakh) Business owner
- Invested in bank FDs and small savings earlier
- Started Rs.2,000 monthly SIP in equity funds in 2000
- Gradually hiked SIP outlay, now invests Rs.1 lakh
Note:I initially preferred the safety of bank FDs, but later realised the wealth creation power of longterm equity investments.”
“Technology works best when it simplifies choices, not when it overwhelms users with options,” Thakkar asserts. A clear example of misallocation is evident in the exposure of B30 cities to thematic and sector funds. The CAMS-CII report shows that gross sales of thematic funds to this cohort of investors increased 128% from Rs.30,140 crore in 2023-24 (15% of total sales) to Rs.68,827 crore in 2024-25 (25% of total sales).
There is little appreciation for asset allocation among B30 cities. Unlike big cities, where debt and hybrid strategies like multi-asset allocation and balanced advantage funds are popular, these don’t find favour in smaller towns. Bhanu Pratap Jain, a mutual fund distributor based in Tinsukia, Assam, points out, “Equities remain the asset of choice; any asset allocation that these investors do is beyond mutual funds, where they are already invested in FDs and small savings.” He also contends that smaller portfolios do not allow for meaningful asset allocation.
Many investors grapple in the darkness, depending on unverified tips or suggestions, making them vulnerable to losses. “Traditionally, small-town investors have relied on bank relationship managers, local agents, or trusted acquaintances. That ecosystem still exists, built on familiarity and personal relationships,” Yadav points out. What has changed is that this layer is now being supplemented, sometimes influenced by digital voices, he adds.
Indeed, the instant reach of social media has allowed influencers to fill the void in financial advice in smaller towns. Yadav adds, “Financial influencers have certainly widened awareness, especially among younger and first-time investors. By speaking in local languages and simplifying investing jargon, they have helped many take the first step.”
But social media is also rife with misleading, half-baked advice that leads many investors astray. “Their influence is largely product-focused and return-centric. Many investors act on short videos or recent performance snapshots, without fully understanding risk, asset allocation, or suitability,” quips Yadav.
Jain laments, “Influencers often create narratives which are misleading, undoing the work done by distributors.” Zinzuvadia adds, “Influencers providing free advice are hurting investors’ mindset, building unrealistic expectations.” Many investors who entered the market based on post- Covid returns brought the wrong expectations. Now, after a prolonged bout of correction, distributors and advisers are trying their best to ensure that investors stay invested and do not make hasty decisions. The cracks are clearly showing—even as gross new SIP registrations in B30 cities increased from 202 lakh in 2023-24 to 274 lakh in 2024-25, SIP cancellations (including expired and ceased) rose much more sharply from 114 lakh to 214 lakh, halving the net SIP registrations from 44% to 22%, according to the CAMS-CII report.
Assets in B30 cities are concentrated in equity funds
B30 cities tend to prefer equity-oriented schemes, whereas those in T30 cities adopt asset allocation approach.
MFDs and RIAs are showing the way
Small-town investors are seeking guidance under trusted intermediaries.
AMIT BARVALIYA,
45 years, Savar Kundla (Gujarat)
Business owner
- Introduced to MFs by bank relationship manager 20 years ago
- Kept hiking SIP outlay through markets ups and downs
- Guidance from MF distributor played key role in disciplined wealth creation
Note:Market ups and downs are inevitable, but confidence in India’s growth remains.
Correcting behaviour
As India’s smaller towns chart their path towards financial freedom, there is clearly a need for more credible, well-rounded advice. “Opening a demat account is access. Becoming a disciplined investor is behaviour. That gap is where the real opportunity lies,” insists AngelOne’s Thakkar.
To be sure, the landscape is undergoing a change. Mutual fund distributors are making their presence felt. Over the three years ending September 2025, more than 53% of new ARN (distributor) registrations came from B30 towns, highlighting a rapid expansion of the distribution network beyond metros. “MFDs have been conducting multiple activities to deepen the market and to spread the knowledge of long-term investing through SIPs and also suggesting appropriate fund categories,” points out Sundeep Sikka, ED and CEO, Nippon India Mutual Fund.
Investors in Tier-2/3 cities are now seeking help, finding merit in formal advice based on trust and comfort. MFDs now account for 31% of gross sales in B30 cities, followed by registered investment advisers (RIAs) at 17%. The latter recorded nearly half of the new SIP registrations in B30 cities in 2024-25, suggests the CAMS-CII report. Bhanu Pratap asserts, “How the adviser talks to them matters now. Investors appreciate open communication without hiding facts and setting right expectations.” Shankar of Centricity WealthTech maintains, “While people are increasingly consuming digital content, we still think actual investment decisions are often validated through known intermediaries.”
Asset managers are also increasingly connecting with smaller towns with outreach programmes, as also physical presence. Sikka remarks, “At Nippon MF, we find that appointing local people and speaking to potential investors in their own language and demonstrating in simple language has helped us to create good awareness about MFs.” He adds that since most of these investors are moving into MFs from traditional categories, setting their expectations correctly is the industry’s and stakeholders’ role. “MF industry also needs to strongly advocate asset allocation to long-term wealth creation by simplifying the content and strongly advocating equity, fixed income, passive funds and commodities as a basket,” Sikka insists.
There is also a clear product penetration gap that needs to be corrected. Thakkar remarks, “Many households in smaller towns are now familiar with equities and mutual funds, but their use of complementary products such as insurance, fixed income products, or goal-based solutions is still limited. The next step is helping investors move from product-level participation to portfolio-level thinking.” Yadav of Wise Finserv puts it another way, “The next phase of growth will be about moving investors from entry to maturity. Awareness around asset allocation, risk management, tax efficiency, and periodic portfolio review still needs strengthening.”
The aspirations of small-town investors are taking flight. India’s continued prosperity depends on how they navigate this financial journey. Kotak MF’s Nilesh Shah has the final word on this shift in investing culture: “Tier-2/3 towns are on a promising journey from asset hoarding to wealth creation. With technology as an enabler and experience as a teacher, these regions are steadily moving towards greater financial security and sophistication.”
