India's Mutual Fund Growth Amid Market Volatility
The Indian mutual fund industry is experiencing remarkable growth, even as the equity market faces challenges. Over the last 18 months, the market has remained within a narrow range without significant fluctuations. Despite this, mutual funds have shown resilience, with assets under management (AUM) skyrocketing from ₹31 trillion in December 2020 to ₹80.23 trillion by December 2025. This represents a solid annual growth rate of 21%, indicating a doubling of AUM in just three and a half years.
This impressive growth is not solely driven by individual investors. Institutional and corporate investments are also contributing to this surge. As a result, mutual funds now represent a larger share of Indian households' financial assets. According to the Reserve Bank of India, mutual funds accounted for only 7% of these assets in March 2020, but this figure rose above 10% for the first time in March 2024, continuing to climb into 2025.
One of the key factors behind this growth is the popularity of systematic investment plans (SIPs). SIPs allow investors to contribute a fixed amount regularly, promoting disciplined investment habits. This method has proven beneficial, particularly during volatile market conditions, as it eliminates the pressure of trying to time the market. Between March 2020 and March 2025, active SIP accounts surged from 31 million to 99 million, with investment amounts increasing 5.5 times from ₹2.4 trillion to ₹13.2 trillion.
Moreover, an encouraging trend is emerging as new investors are increasingly coming from smaller cities. The share of mutual fund AUM from cities outside the top 15 has grown from 14.4% in March 2015 to 35.4% in March 2025. This shift signifies the opening of new markets and reflects a broadening investor base eager to participate in the mutual fund space.
Long-term investments in mutual funds are proving advantageous, especially in equity funds, which can be volatile. Investors are becoming more adept at maintaining their investments, with the percentage holding their equity fund investments for over two years rising from 47% in September 2019 to 61% by September 2025. Additionally, an increasing number of investors are opting for direct plans, which tend to have lower expenses and potentially higher returns compared to regular plans.
In conclusion, the Indian mutual fund industry is on a robust path of growth, driven by SIPs and an expanding investor base. As more households shift their financial assets toward mutual funds, especially from traditional bank deposits, the future looks promising for both the industry and investors willing to commit to long-term strategies.
