In the first quarter of this year, Delhi, Mumbai, Chennai, Bengaluru and Kolkata accounted for 26.4 percent of the entire smartphone market  as compared to 29.9 percent in the last quarter of 2015 - indicating that the smartphone market is gradually deepening towards smaller cities, the report added.

"China-based vendors have understood this trend and are gradually building and investing significantly in the offline distribution network in tier 2 cities and beyond. This really shows that the offline channel remains significant and the vendors have understood that offline must go hand in hand with the online channel," explained Navkendar Singh, senior research manager, IDC India.

"As Tier 1 markets saturate, the next growth frontiers for smartphone players are clearly the smaller cities and towns," he added.  China-based vendors have already captured more than 20 percent of the smartphone market in 25 tier 2 and 3 cities and are expected to penetrate further as their offline presence increases.

"Majority of the sales for Lenovo, Motorola, Xiaomi and LeEco are still coming from the online channel in these cities due to their superior positioning as quality brands, with a value for money proposition," Singh informed.

Others like Oppo and Vivo are expected to grow in coming months in these markets with their huge marketing spends and increasing retail presence."In tier 2 and 3 cities, China-based vendors are eating into the 4G device share of global brands, with almost 40 percent of the demand being generated by them," noted Varun Singh, market analyst (channels) at IDC India.