MF AUM May Cross ₹300 Lakh Cr by FY35 on Rising Retail Participation: Report

Mutual fund assets under management (AUM) are projected to exceed Rs 300 lakh crore by 2035, with direct equity holdings expected to reach Rs 250 lakh crore over the same period, according to a joint report by consulting firm Bain & Company and investment platform Groww.

This growth is driven by rising retail participation and a deepening digital adoption, the report said.

According to the report titled 'How India Invests', mutual fund penetration across Indian households is expected to double from 10 per cent to 20 per cent over the next decade.

The next wave of growth in the mutual fund industry will be driven by "increasing household adoption, strong digital enablement, supportive regulation and growing investor trust".

On the other hand, the expected growth in equity participation can be attributed to the shift from speculative trading to long-term investing, in addition to continued digitally driven penetration and strong market performance.

The Securities and Exchange Board of India (Sebi) has introduced several stringent measures to curb excessive speculation and manage risk in the derivatives market. These rules encourage investors to move toward steadier, wealth-building instruments by making speculative futures and options (F&O) trading less accessible and more costly for retail participants.

A recent Sebi study revealed that 93 per cent of individual traders incurred losses in equity F&O (Futures & Options) between FY22 and FY24.

The report said that about 9 crore incremental retail investors are expected from Gen Z and millennials, led by higher digital adoption and growing financial literacy.

Saurabh Trehan, Partner & Head of Bain India's Financial Services practice, said that "Indian households are steadily shifting from a traditional savings mindset to a more investment-oriented approach, with mutual funds and direct equities emerging as the fastest-growing asset classes in recent years".

He added that "as more households, especially young and first-time investors and those beyond the top 30 cities, embrace market-linked products and longer holding periods, we're seeing the emergence of a deeper and more resilient domestic investor base".

The report revealed that long-term investing behaviour is strengthening, with the share of over-five-year mutual fund holdings rising from 7 per cent to 16 per cent, and over-five-year SIP (Systematic Investment Plan) holdings increasing from 12 per cent to 21 per cent.

According to the report, younger investors, women and households in smaller cities are driving the expansion of the country's investor base.

Mutual fund folios have grown 2.5 times in the last five years, although individual gross flows have risen only 7 per cent, indicating that many new investors are entering with smaller ticket sizes.

SIP inflows have risen at a 25 per cent CAGR over the past decade. Investors under 30 years now account for 40 per cent of NSE-registered market participants, up from 23 per cent in FY19. Cities beyond the top 110 contributed 19 per cent of mutual fund AUM in FY25, compared with 10 per cent in FY19, while 55-60 per cent of new SIP registrations originate from B30 cities. Women now account for 25 per cent of the investor base.

Digital platforms continue to reshape retail investing behaviour, with nearly 80 per cent of equity investors and 35 per cent of mutual fund investors onboarded digitally, with Tier-2+ cities comprising nearly half of all digital investment activity.

"We are witnessing a definitive structural shift in Indians-moving from a savings-first to an investing-first mindset," Harsh Jain, Co-founder and COO of Groww, said.

He added that digital infrastructure and regulatory progress have democratised access and fostered deep trust in the ecosystem with a diverse, resilient investor base emerging from Tier 2+ cities and younger demographics, who are strengthening India's capital markets from within.

The report highlighted retail investing as a major contributor to India's journey toward a USD 10 trillion economy, and such investing is poised to create more than 7 lakh new jobs, both within the financial ecosystem and across businesses, gaining access to growth capital.

IPO proceeds from SMEs have risen from about Rs 1,800 crore in FY19 to nearly Rs 6,000 crore in FY24, reflecting increasing liquidity and investor appetite.