Insights

FundsIndia’s Successful Investors: A Data Analysis

May 18, 2015 . Nilakantan Rajaraman

I’m Nilakantan S. Rajaraman and I work as a Data Scientist at FundsIndia. One of the things I do every day is stare at data. And hope for some insights that may be of value. I hope some of what I find interesting in the data analysis will raise your eyebrow, too.

India’s great cities are also where a significant section of the FundsIndia investing community lives. How do the cities rank against each other on various parameters? Is there a city that’s singularly investment savvy? These are questions which have fascinated me and I thought I’d stare at relevant data today.

Firstly, let’s look at who’s the investor in these various cities. In terms of age, the spread across various cities is remarkably similar. The average investor’s age is between 33 and 35 for all cities. This also confirms what financial advisors say anecdotally: people start getting serious about their goals in their early 30s when they have just started a family.

What varies significantly is the extent of female investor participation across these cities. Mumbai, for instance, has an almost 8.2 percentage point lead over Kolkatta in terms of women being part of its investing community. Consequently, and for completely unrelated reasons, Mumbai also has 3 times the number of investors as does Kolkata. The demographic detail is explained in the table below,

City

Mean  Age of Investor

Female Participation

Bangalore

33

20.53%

Chennai

35

19.89%

Delhi NCR

34

21.65%

Hyderabad/Secundrabad

33

17.55%

Kolkata

35

16.09%

Mumbai

34

24.30%

Pune

34

17.80%

As the data shows, approximately 1 in 5 investors is female across India. This is even lower than India’s already low female workforce participation rate which is 32%. Kolkata, Hyderabad and Pune seem to be worse off than other cities in this regard.

Another basic way to rank cities is to look at average investor wealth. It’d be interesting to see if that  corresponds to our pre-existing notions. For instance, one commonly held perception is that wealth is concentrated in Delhi & Mumbai. We’d also expect these two cities to lead the way in terms of their equity fund holding as a ratio of their overall portfolio. Is that borne out in our data? Consider the mean AUM of investors in these cities,

City

Mean AUM

Equity AUM Ratio

Hyderabad/Secundrabad

2.58

55.95%

Bangalore

2.53

67.55%

Chennai

2.44

67.83%

Pune

2.38

57.42%

Mumbai

1.89

72.97%

Delhi NCR

1.57

73.15%

Kolkata

1.00

74.83%

[The actual AUMs have been indexed to Kolkata so as to not make AUM details public]

Surprisingly, Hyderabad happens to have the richest investors when measured by mean total assets in FundsIndia platform. Both Mumbai and Delhi rank at the bottom half. Quite distinctly, the IT Services driven cities of Hyderabad, Bangalore and Chennai seem to have wealthier investors. But the question remains, are these investors “rich” because of them being innately that or is their portfolio a reflection of the investing styles? Let’s explore what the data suggests.

A cursory look at the data suggests the following:  investors from Kolkata, Delhi and Mumbai, while having the lowest asset value, have the highest proportion of their assets in equity funds. Conversely, Hyderabad investors have the lowest proportion of their assets in equity funds. This is counter-intuitive from a prosaic view point. Aren’t equity investors supposed to reap better rewards over time? Therefore, shouldn’t we expect those with higher equity allocation to also be more wealthy?

The answer to that seems to be evident when we see the behavioural pattern of investors across these cities. Are people investing in equity funds, behaving as if those funds were stocks? Is there evidence that those with higher equity holdings are trying to time the market instead of accumulating? Data suggests, that may well be the case. Consider the last month’s data,

City

Last 1 Month Mean Inflow

Equity Ratio of Inflow

Chennai

3.07

59.40%

Pune

2.63

41.62%

Hyderabad/Secundrabad

2.20

78.09%

Bangalore

1.86

68.89%

Delhi NCR

1.67

80.31%

Mumbai

1.60

6.07%

Kolkata

1.00

7.40%

[The actual inflow has been indexed to Kolkata so as to not make AUM details public]

The last 1 month in Indian equities have seen quite significant corrections. What we see here is, both Kolkata and Mumbai, seem to have cut down on inflows. Especially, they have almost no equity related investments in the past month. This is the clearest indication that these are investors who are trying to time the market instead of accumulating over time. Meanwhile, the IT Service dominated cities have almost no change in their investment patterns when the market corrects. They seem to be following a systematic approach to investing which, as data points to, is giving them better returns over time. Not only is their corpus higher, even their portfolio performance over the past 12 months is higher. We will investigate these aspects in the next post.

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