Rapid Growth and Adoption of Mutual Funds by Household Investors

Household investors are increasingly adopting mutual funds (MFs), investing more via systematic investment plans (SIPs) in a disciplined, staggered manner. Investors are holding MF portfolios for longer durations, supporting wealth creation through compounding and reduced risk.

Investment Trends

• Preference for Equity Funds: Majority of investors focus on equity funds and hybrid schemes (combining income and equity).
• Systematic Investment Plans (SIPs):
  • SIP accounts rose to 81.1 million by March 2025, up from 63.8 million in April 2024.
  • SIP inflows increased to ₹2.9 trillion, up from ₹2 trillion the previous year.
  • Longer-term SIPs gaining traction: 33% of regular plan SIP assets and 19% of direct plan SIP assets are held by accounts over five years old.
  • Over 60% of SIPs are held by accounts more than two years old, up significantly from five years ago.
• Passive Index Funds: Recorded a massive 278% year-on-year inflow growth to ₹59,306 crore in FY 2024-25.

Economic and Market Implications

• Capital Access for New Businesses: Increased equity investments improve capital availability, fostering entrepreneurship and business growth.
• Risk Mitigation: Professional fund management and diversified portfolios help reduce the risk of capital erosion.
• Wealth Creation: Equity assets’ long-term returns enable substantial household wealth accumulation.

BS