Based on a report, How India Invests 2025, which Bain and Company released in partnership with Groww, it is estimated that the assets of India's Mutual Funds will surpass Rs 300 lakh crore by 2035, while direct equity AUM might reach Rs 250 lakh crore over the same time. This surge is signalling a major shift in the investment landscape of the country.
The mutual fund industry is continuously growing as household investments are increasing. This growth is fueled by easy access to digital tools, supportive regulations and increasing trust from investors. Mutual fund penetration in Indian households is projected to double from 10% to 20% in the next decade. The next phase of the industry growth will be driven mainly by the rise in mass and mass-affluent households beyond the top 30 cities, according to the report. The affluent folks in the following 70 cities will further increase this growth and the long-term investments are also expanding. Over the past five years, the AUM increased from 7% to 16% and SIPs rose from 12% to 21%, indicating the growing trust and confidence of investors.
Saurabh Trehan, Partner and Head of Bain & Company's Financial Services in India, says, "Indian households are ditching old-school and traditional savings and adapting a more investment-oriented approach for investing big in mutual funds and direct equities, emerging as the fastest-growing asset classes in recent years". He also added that, "As more households, especially young investors and beginners and those beyond the top 30 cities are starting to invest in market-linked products and hold them for longer. This change is creating a stronger and more reliable base of domestic investors. As investments through SIP (Systematic Investment Plans) and long-term holdings increase, this trend will be key to how India funds its growth in the coming years".
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The rise in equity investing comes from more innovative strategies, people are taking fewer risks and focusing more on buying and holding assets. Digital tools and strong market conditions make investing easier. We expect 9 crore new retail investors from Gen Z and millennials, encouraged by user-friendly apps and better financial knowledge. The report highlights a big change in investing: younger people, women and those from smaller towns are getting involved. Mutual fund accounts have increased 2.5 times in five years, but average investments only rose by 7%. This shows that many new investors are starting with smaller amounts, the report said.
SIP inflows have grown by 25% each year over the past decade, driven mainly by people aged 18 to 34. Now, 40% of investors in the NSE are under 30, which is double the amount from FY19. Smaller cities are thriving too, 55-60% of new SIPs come from B30 areas. Beyond the top 110 cities, these areas hold 19% of mutual fund assets in FY25, up from 10% in FY19. Women make up 25% of investors now in 2024, compared to 20% in FY19. Digital platforms are popular: 80% of new equity investors and 35% of mutual fund investors join through apps. Gen Z accounts for 45% of investors, mostly salaried, with half of the users coming from Tier-2 and smaller cities.
"People in India are shifting from saving money to investing," says Harsh Jain, co-founder and COO of Groww. "The government's digital initiatives and new rules have built trust. Young people and those from smaller cities are creating a strong group of investors, which is boosting the market." Retail investing powers India's $10 trillion dream through capital, wealth and jobs. More players mean deeper liquidity for SME IPOs, jumping from Rs 1,800 crore in FY19 to Rs 6,000 crore in FY24.
Rakesh Pozhath, Partner and a key member of Bain & Company’s Financial Services practice in India, said that "India is starting a new chapter in retail investing, which will be crucial for the country's economic growth. By making it easier to access capital, creating more wealth, providing new job opportunities and strengthening its capital markets, retail investors are significantly changing how capital flows. Additionally, consistent domestic investments are giving India’s capital markets new strength, allowing them to handle market ups and downs better and recover more quickly”.
The economy is becoming more equitable by providing better financial options for women & youth, shifting their money from bank accounts to investments with higher returns. This shift has also led to the creation of over 700,000 new jobs in finance and other sectors. When domestic mutual funds receive investments, they help stabilize the market during foreign investor withdrawals and contribute to quicker recoveries.
"Retail investments are transforming India’s economy with easier access to capital, wealth creation, job opportunities and more challenging market conditions," says Rakesh Pozhath from Bain's Financial Services. "Domestic investments are making the market more resilient than ever." More people from diverse backgrounds are joining India's investment scene. This makes investing more inclusive and reliable. With longer investment periods, regular savings plans and a nationwide presence, these changes are helping to build wealth and strengthen the market for the next decade.
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