Mutual funds may emerge, and are emerging, as the most preferred investment choice for Indians. Most money is, and will be, pumped into equity funds. These are the major trends in the segment over the past decade, which will continue over the next one. According to the Association of Mutual Funds in India (AMFI), the mutual funds’ assets under management (AUM) grew six-fold to over Rs 80 lakh crore between November 2015 and November 2025. A new report, ‘How India Invests,’ by Bain & Company in partnership with Groww, projects it to exceed nearly four-fold to Rs 300 lakh crore by 2035. By then, direct equity holdings will climb to a lower Rs 250 lakh crore.
More households are opting for mutual funds as a route to invest in equity and debt instruments. The Bain-Groww report notes that the penetration level is likely to double from 10 per cent to 20 per cent over the next decade. This will be driven by sustained investor trust, digital access, and broader financial awareness. Saurabh Trehan, Partner & Head of Financial Services at Bain & Company India, highlights the shift in behaviour. “Indian households are steadily shifting from a traditional savings mindset to a more investment-oriented approach. We are seeing the emergence of a deeper and more resilient domestic investor base,” he explains.
Three trends are evident over the past few years. The first is that mutual funds have reached higher acceptance levels in the smaller cities and towns. According to a Bain-Grow report, 55-60 per cent of new SIP (Systematic Investment Plan) registrations now originate from B30 cities, and those beyond the top 100 ones contribute almost a fifth of AUM, a figure which is up from a tenth six years ago. According to its press release, “The next phase of industry growth will come primarily from mass and mass-affluent households beyond the top 30 cities. Increased adoption among affluent investors across the next 70 cities will further accelerate this expansion.”
AMFI’s data and claims support these contentions. The association states that with large scale advertising and messaging, like the ‘Mutual Fund Sahi Hai’ campaign that reached 350 million, mutual funds have become a mainstream investment option, and are accessible to first-time and young Indians. The industry conducted 14,500 educational programmes for a million people in FY2024, and there were attempts to integrate financial literacy with school curricula. Over the past decade, AMFI’s senior management focused on expansion to the smaller cities, and inclusion of more households. Over the next decade, AMFI hopes to enhance retail penetration, and increase the number of retail investors by five times to 250 million.
The second noticeable trend is the higher discipline among the retail investors. This is evident, according to Bain-Groww, from the more than doubling of investors who held the mutual funds for more than five years, from seven per cent to 16 per cent over the past few years. In addition, long-term SIP holdings increased from 12 per cent to 21 per cent over the recent past, which signals stronger investor discipline and confidence. Despite the regular discontinuance of SIPs, which invariably happens during downturns, the higher overall acceptance, and growth of SIPs indicates a shift among the investors towards goal-based, and target-based investing.
Finaly, it is about the changing demographics. Youngsters, first-timers, and newcomers have adopted mutual funds, and are “likely to contribute to the market growth” over the next decade. The Bain-Groww report highlights that the average monthly SIP inflows rose by a compounded annual growth rate of 25 per cent, “driven largely by 18 to 34-year-olds, a demographic which is increasingly shaping the direction of domestic capital markets.” In addition, younger investors under 30 represent 40 per cent of the NSE-registered investors, which is up from 23 per cent six years ago. Women’s share grew from 20 per cent to 25 per cent in the same period.
While the mutual funds folios grew 2.5x in the past five years, individual gross flows went up by a mere seven per cent. For some experts, this may be a matter of concern. For Bain-Groww, this underscores the “entry of a large cohort of new investors with smaller ticket sizes.” Investments in smaller amounts indicate that there is more acceptance of SIPs, and the entry of a huge number of first-timers and youngsters, whose salary bases may be low but they are still interested in disciplined and long-term investing. Women may be generally keen to start with low amounts, and gradually shift to higher ones once they gain confidence and experience.
Digital investment platforms play, and will continue to play a catalytic role in accelerating equity and mutual fund participation. At present, nearly 80 per cent of equity investors, and more than a third of mutual fund investors are onboarded digitally, and the smaller Tier-2+ cities account for almost half of the users. “Gen Z now makes up approximately 45 per cent of the investor base, and continues to grow,” states the Bain-Groww press release. Harsh Jain, Co-founder and COO of Groww, says, “We are witnessing a definitive structural shift. The Government’s push on digital infrastructure, combined with progressive regulatory measures, has democratised access and fostered deep trust in the ecosystem.”
This tech-led expansion is expected to bring in nearly 90 million new retail investors, largely millennials and Gen Z, which will propel India toward a deeper, more stable domestic capital formation. Younger demographics, and a diverse and more resilient investor base will strengthen the capital markets. Such changes will be both expansive, and inclusive, as a larger number of households shift from savings to investing. The broad reach of the digital investment channels, and the Government’s efforts to inculcate digital payment modes will aid and enhance the investment process.
Retail investing, say experts, will play a pivotal role in India becoming a $10-trillion-plus economy. It will prove to be a crucial turning point in how India builds long-term wealth, and capital market strength over the next decade, and onwards till 2047. “India is entering a new era of retail investing, one that is poised to play a pivotal role in the country’s economic development. By expanding access to capital, broadening wealth creation, unlocking new job opportunities, and strengthening the resilience of India’s capital markets, retail investors are reshaping the flow of capital in meaningful ways. Just as importantly, steady domestic inflows are giving India’s capital markets a level of resilience we have not seen before, helping them to absorb volatility, and recover faster,” explains Rakesh Pozhath, Partner and a leading member, Bain & Company.
