India's Mutual Fund Industry Reaches ₹80 Trillion Milestone
The Indian mutual fund industry has demonstrated remarkable resilience, achieving an unprecedented ₹80.23 trillion in assets under management (AUM) by December 2025. This represents a substantial increase from ₹31 trillion in December 2020, translating to a compounded annual growth rate of 21%. Despite equity markets moving within a narrow range over the past 18 months, mutual funds have maintained their appeal and foundational strength.
Household Financial Assets Shift Towards Mutual Funds
Mutual funds now constitute a larger portion of Indian households' financial assets. According to Reserve Bank of India data, their share increased from 7% in March 2020 to over 10% in March 2024, with further growth observed by March 2025. Concurrently, the share of bank deposits in household financial assets declined from 46.2% to 43.4%, indicating a shift towards potentially higher-return investments.
The Systematic Investment Plan (SIP) Revolution
A key driver behind this growth is the widespread adoption of Systematic Investment Plans (SIPs). These automated investment tools ensure disciplined investing and eliminate the need for market timing. Between March 2020 and March 2025:
- The number of active SIP accounts surged from approximately 31 million to 99 million.
- SIP investments grew 5.5 times, from ₹2.4 trillion to ₹13.2 trillion.
Although net SIP additions have recently slowed, they remain positive, underscoring sustained investor interest.
Geographic Expansion Beyond Metropolitan Cities
The mutual fund industry's growth is increasingly fueled by investors from beyond India's top metropolitan areas. This geographic diversification signals the opening of new markets and long-term sustainability:
- The share of SIP accounts from cities beyond the top 30 rose from 47% in March 2020 to 55% in March 2025.
- According to SEBI data, the AUM share from cities beyond the top 15 increased from 14.4% in March 2015 to 35.4% in March 2025, with consistent growth over nine of the past ten years.
Increased Investor Discipline and Long-Term Holding
Indian investors are displaying greater patience and long-term thinking. Data from the Association of Mutual Funds in India (Amfi) reveals that the proportion of individual investments in equity funds held for over two years increased from 47% in September 2019 to 61% in September 2025. This stickiness benefits both investors and fund managers by reducing portfolio adjustments and supporting business growth.
Rise of Direct Plans and Cost Efficiency
Investors are increasingly opting for direct plans, which bypass commissions to distributors, leading to lower expenses and potentially higher returns. In 2024-25, approximately 80% of mutual fund investments were in direct plans. For instance, the Nippon India Large Cap Fund's direct plan yielded a 19.43% compounded annual return over five years, compared to 18.42% for its regular plan—a difference of about ₹10,000 on a ₹1 lakh investment. While adoption varies, with higher rates in metros like Delhi and Mumbai, this trend enhances overall investor returns.
Conclusion: A Foundation for Future Growth
The mutual fund industry's gains appear foundational, with intrinsic appeal enduring despite market fluctuations. Factors such as SIP-driven discipline, geographic expansion, increased investor holding periods, and the shift towards direct plans collectively strengthen the industry's edifice. These developments position India's mutual fund sector to navigate potential market challenges while continuing its growth trajectory, benefiting both investors and the broader financial ecosystem.
