According to modern portfolio theory, an optimal portfolio can be created by diversification of assets or securities with low or negative correlation. A higher degree of positive correlation within an economy indicates limits to mitigating risk by diversification. This suggests the possibility that risk reduction might be facilitated by diversifying securities portfolios internationally. In an optimum portfolio, investors should hold a well-diversified set of securities in which the share of domestic assets is proportional to the country’s share of world market capitalisation. In reality, investors hold a disproportionately large part of domestic assets in their portfolios. This lack of international diversification is referred to as equity home bias or home bias. When the same phenomenon manifests as a preference to invest higher proportions in assets located close to the investor within domestic boundaries, it is referred to as local bias. Since the cause and effect of both home bias and local bias are similar, the terms home bias, equity home bias, local bias, location bias and location preference are used interchangeably in this study to represent proximity preference. Despite gains from international diversification, there is a strong preference for domestic equities among investors. Various explanations for this investment behaviour have been presented in the past. Earlier studies point to economic barriers to international investment as one of the reasons for this phenomenon. Initially, these barriers included capital controls and foreign taxes as deterrents for international diversification. However, with extensive financial liberalisation across the globe including emerging economies, the capital controls have significantly reduced. So, the other economic barriers to diversification include home advantages in terms of lower transaction cost, no exchange risk, familiar regulatory regime, and absence of sovereign risk. Even these factors, have not been able to explain the home bias phenomenon completely. Among the various other reasons attributed to this phenomenon, the informational difference (information asymmetry) between domestic and foreign investors is attributed as one important factor, where the domestic investors have a cumulative information advantage over foreign ones. There are various theoretical and empirical research on the role of information asymmetry in home bias. Some dominant factors contributing to the information asymmetry include distance, language and culture, accounting standards or transparency and corporate governance. Of these factors, distance is the one that has been extensively studied. These studies suggest a direct relationship between distance and information asymmetry in portfolio choice. As a corollary, international equity flow is inversely related to distance. One empirical study has analysed the effect of distance even on domestic portfolio choice by analysing the mutual fund portfolios in the US. This study suggests that informational difference in international portfolio investment holds good even in the domestic context. However, later studies have shown that in the last few decades, financial globalisation has resulted in a reduction in home bias. Financial globalisation generally refers to an economic environment of liberalized capital movement, less transaction cost, speed of transaction fostered by electronic trading etc. but a critical aspects of financial globalization is increased access to information both within and across borders. Extensive use of information technology coupled with a reduction in communication costs has improved access to information in the last few decades. Information technology and communication cost are key to improving access to information, thereby reducing information asymmetry. An important study on the impact of information technology on increasing the distance between lenders and small borrowers validates this premise. Information technology has improved access to information for both lenders and investors. Similarly, better information technology has improved access to quality information, thus reducing the information asymmetry between investors and firms. Unlike in advanced economies, studies on the equity home bias or local bias phenomenon in emerging economies like India has been limited. As mentioned, emerging economies are fast growing and their share in the world market capitalization has increased from 18% in 2013 to 26% in 2021. Amongst emerging markets, the weightage of India in the MSCI Emerging Market Index has grown sharply from 8.2% in 2019 to 14.5% in 2021, suggesting its importance in the emerging market space. Between 2013 and 2021, the Indian equity mutual funds (MF) have grown by 720% in terms of assets under management (AUM). Further, the equity MF as a percentage of total market capitalisation has increased from 2.5% to 5% during the same period. However, despite the growth, size and importance of India and its mutual fund sector, there is no study available especially on the home bias or local preference of equity mutual funds. During Covid-19, prolonged lockdowns in various parts of the world saw increased usage of information technology resulting in the proliferation of digital communication technology and internet infrastructure in all walks of life. In India, all forms of information dissemination by listed corporates viz. quarterly results, investor presentations, annual general body meetings, the outcome of board meetings etc. were increasingly being done digitally instead of physical meetings resulting in transforming traditional paper-based information and in-person engagements to online content and digital communication. A study highlighted that Covid 19, which led to a proliferation of remote communication technology and internet infrastructure has resulted in a further reduction in the levels of informational asymmetry prompting venture capital investors to invest in firms and businesses which are farther from their location. Further, data shows that foreign equity asset ownership in India during the pandemic period, increased from USD 2.6 bn in 2019 to USD 6.5 bn in 2021, which is a 146% jump. The foreign asset ownership as a percentage of market capitalisation increased from 0.12% to 0.18%. during 2019-2021 period (Reserve Bank of India International Investment Position, 2022). Thus, initial studies and data point in the Indian context suggest a reduction in equity home bias, implying that the explanatory power of distance as a proxy for information asymmetry may have reduced. There are also studies which show that during crisis periods or economic shocks, uncertainties compel investors to invest in familiar local financial assets which accentuates the equity home bias phenomenon. Some studies have shown that economic shocks and uncertainties like the global financial crisis of 2008 induced investors to liquidate their foreign investments and bring money back to the domestic markets. But as mentioned earlier, during this economic crisis, i.e. Covid-19, it was found that foreign equity asset ownership in India increased which suggests diversification away from home. Given the contradiction between the existing studies and broader data during Covid-19, it is a curious case to examine the proximity preference of investors in India during the pandemic and also compare the same with the pre Covid 19 period. More specifically this study examines the local preference in equity mutual fund portfolios in India in recent times (post-Covid) and carry out a comparative study to examine the change in local bias phenomenon in mutual funds portfolio between pre-Covid and post-Covid periods (2013, 2019 and 2021). Lack of any study on local bias phenomenon in Indian mutual funds and a seeming change in investment trend during Covid-19 are potential issues in the economic and business context of the Indian financial sector which needs to be investigated. Further, studies have shown that home bias is less for companies with larger market capitalization. A study on foreign ownership of Japanese stocks found that foreign investors overweight large firms and underweight small firms. Given the widely available information on all listed companies in India, it is proposed to study whether location preference changes for different categories of MFs viz. Large-cap, Midcap, Large-midcap and Small-cap which invest in different sized companies in terms of market capitalisation. Finally, studies in developed countries have shown that fund managers who exhibit local bias generate higher returns on their investments due to better access to information. This study examines whether fund managers in India generated better returns by investing in firms/companies closer to them or otherwise. To examine this, the comparison of local bias and the net returns is done for two periods – pre-Covid (2019) and post-Covid period (2021). In this study, home bias or local bias is defined as the fund manager’s preference for local stocks compared to a pre-specified benchmark (or market portfolio or benchmark index). This is a well-established methodology which has been used in various studies relating to the home/local bias phenomenon in mutual funds. This pioneering study on local bias in Indian MFs is done examining a total of 400 mutual funds – which is 90% of the total AUM of MFs in India – across these three time periods (2013, 2019 and 2021). The location and distance of over 1000 listed Indian companies are calculated in this study. On calculating the local bias (LB) for 2013, 2019 and 2021, it was found that 2013 saw no local bias (-13%) suggesting that the average distance of the portfolio and the benchmark were not significantly different. However, by 2019, there was a negative local bias (-15%) which is statistically significant, suggesting that the fund managers invested in farther locations compared to the benchmark. By 2021, the extent of negative local bias became much larger (-49%) which shows that the mutual fund managers are investing 49% farther from the benchmark. This drastic increase in negative local bias (which means MFs investing in farthest locations) is mainly due to an increase in foreign stock investment by MFs. The findings suggest that distance as a proxy for information asymmetry has less explanatory power in the current context. Even when only domestic stocks are considered, the negative LB marginally increased from 2013 to 2021, suggesting that mutual funds have gradually increased the proportion of stocks which are located farther domestically. These results in post-Covid times suggest that investment decisions of mutual fund managers (who invest mainly in listed companies in India) are guided by factors other than distance. Further, the findings show that during Covid (an economic crisis) the MFs invested farther away from the benchmark and diversified internationally. This is contrary to the existing studies that suggest investors under-diversify and reduce their foreign investments during an economic crisis. In the second part of the study, the empirical results show that local bias (or proximity preference) is absent in all categories of mutual funds irrespective of the size of the companies in which they invest. This is unlike the finding of earlier studies in which the local bias is less for companies with larger market capitalization. This suggests that there is no information-related advantage for any particular size of the company in which fund managers invest. These results also suggest that the investment decisions of mutual fund managers (who invest mainly in listed companies in India) are guided by factors other than distance. Finally, when the local bias (LB) is compared with the net returns of various mutual fund schemes for two periods – pre-Covid (2019) and post-Covid period (2021) – the results are contrasting. The results of 2019 suggest that when fund managers invest in closer locations (local bias of +24%), the net returns generated are positive (+1.78%) whereas they generate negative net returns (-2.04%) when investing in a distant location (local bias of -130%). These results are consistent with the earlier studies that found fund managers generating abnormal returns by investing in companies closer to their offices. Existing literature links home bias or local bias to information advantage for the fund manager leading to better returns. However, in 2021, we find that mutual funds which invested in farthest locations (local bias of -188%) generated abnormally high net returns to the extent of +8.3% and mutual funds which has invested close to home location (closer than the benchmark to the extent of +17%), generated a negative net return of 3.3%. These results indicate that after Covid, fund managers have been able to generate better net returns by investing in farther locations. This shows that proximity which resulted in informational advantage earlier does not seem to be a significant factor in the post-Covid 19. One of the contributions of this study to the literature is the local bias or home bias measure of equity mutual funds in India. While home bias has been extensively studied across various geographies, the home bias phenomenon in mutual funds in India is yet to be analysed. By comparing the local bias during pre-Covid and post-Covid periods, this study also contributes to the literature on the investment behaviour of fund managers in an emerging market like India in the backdrop of Covid-19. The study also compares the performance of mutual funds with a local bias and shows that mutual funds which invested farther away from the benchmark performed well and gave abnormal net returns to the investors in the post-Covid period. Given the fact that there has been no country-specific study on India comparing the returns generated by mutual funds and local bias, this study contributes to the literature in this regard. Theoretical model by Portes and Rey (2005) show that distance is one of the proxies for information asymmetry. This study examines the model to validate whether distance still has explanatory power in determining the portfolio flows in an economy. There are theoretical research on economic crises and capital flows which shows that during crisis periods or economic shocks, investors tend to invest in familiar local investments, which increases the equity home bias phenomenon. The outcome of this study is an important contribution to understand whether the earlier theoretical models on economic crisis hold good in the context of Covid-19. Since this study is an analysis of equity mutual fund schemes in India, one of the practical implications of this study is the contribution to various stakeholders of mutual funds. The stakeholders include the regulator, mutual fund houses or fund managers and investors who invest in mutual fund schemes. One of the practical contributions of this study is providing a numerical measure of geographical diversification by calculating the local bias for every equity mutual fund scheme in India. This is one way of informing the stakeholders about the extent of geographical diversification of the respective mutual fund. Although this study has examined the local bias before and after Covid-19, it has not analysed the reasons for the shift in the same. The scope of this study is limited to measuring the local bias of equity mutual funds in India in the pre and post-Covid period and not to analyse the reasons for the change. There could be many reasons for this change in home bias during Covid-19 viz. easy monetary policy and liquidity conditions leading to low interest rates, information technology bridging the informational difference and improving commerce, stock market performance of various markets, country-specific idiosyncratic factors, industry-specific idiosyncratic factors, and so on. The recent development of increased use of information technology during Covid-19 is only a motivation and not a conclusion of this study. Analysing the reasons for the change in the home bias or local bias phenomenon during Covid-19 can be an interesting future area of study.