Mutual funds on the rise: who’s investing the most?

admin — Wed, 01 Oct 2025 01:30:00 +0000

Trader businessman searching on smartphone, analyzing in dynamic stock exchange investment
| Photo Credit: NanoStockk

At a time when foreign investors have been pulling money out of the Indian stock market, domestic investors have kept it afloat with their steady contributions. Data show that this trend has persisted for some time now. But who are these domestic investors, especially those putting their money into mutual funds?

Data show that urban Indian men continue to dominate the domestic investor market. However, in recent years, the share of those from smaller towns and non-metro areas has steadily increased. Also, one in four of these investors is a woman.

Foreign Portfolio Investors are those who invest in the stocks and shares of another country — in this case, India. On the other hand, Domestic Institutional Investors are investment bodies within India, such as mutual funds, insurance companies, banks, and pension funds, that channel money into the domestic financial market. Among them, mutual funds form a major category, pooling money from shareholders and investing it across different securities.

FPI ownership in NSE-listed companies has fallen to a 13.5-year low, while the share of Domestic Mutual Funds (DMFs) has climbed to a record high. Despite the decline, FPIs still held a higher share — 17.3% — compared with 10.3% for DMFs. So, while self-reliance through domestic investors is on the rise, the role of FPIs remains crucial.

DMFs are largely powered by Systematic Investment Plans (SIPs). These plans allow investors to put in a fixed amount of money at regular intervals — sometimes as little as ₹1,000 every month — without having to worry about when to enter or exit the market. The number of new SIP accounts surged from 14.1 million in 2020-21 to 68 million in 2024-25. Over the same period, assets under management (AUM) through SIPs grew from ₹4.27 trillion to ₹13.35 trillion.

Consequently, while a significant share of households still relies on traditional savings tools such as bank deposits, life insurance funds, and public provident funds, the proportion investing in mutual funds has been steadily rising. The share of mutual funds in households’ gross financial savings grew from 0.9% in 2011–12 to 6% in 2022–23.

An RBI study concluded that access to the market — measured by the number of demat accounts — is the most influential factor in shaping people’s willingness to invest in mutual funds. In other words, simply having the means to invest is often enough for people to begin. Other crucial determinants include low fixed deposit rates and a supportive business environment.

The number of demat accounts across India rose by 200% between 2020 and 2024, increasing from 3.8 crore to 11.8 crore. Every State/Union Territory recorded at least a 100% jump. In Bihar, the number of accounts grew by over 400% — from about 9.6 lakh to 50 lakh — while in Uttar Pradesh they climbed 348%, from 0.2 crore to 1.3 crore.

Investor participation is also no longer concentrated in metros. In September 2015, more than 80% of mutual fund AUM came from just eight cities — Mumbai, Delhi, Bengaluru, Chennai, Kolkata, Ahmedabad, Pune, and Hyderabad. By March 2025, this share had dropped to 60%.

Also, investors are not just men. Data shows that one in four investors is a woman. As of FY25, close to 25% of individual investors are women. This has been the case since at least FY16.

Source: National Stock Exchange’s “India Ownership Tracker”, Reserve Bank of India, the Centre for Monitoring Indian Economy, Ministry of Statisticts and Programme Implememntation

devyanshi.b@thehindu.co.in

vignesh.r@thehindu.co.in

Published – October 01, 2025 07:00 am IST

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Tax administration must be smoothened for capital markets growth

admin — Fri, 19 Jul 2024 01:30:00 +0000

Rough edge: India must eliminate administrative irritants and create an enabling environment for investors and entrepreneurs.
| Photo Credit: Reuters

The current environment for the capital markets is extraordinarily positive, with a prevailing bullish sentiment. We are in the midst of one of the most significant revolutions, as retail investors, who historically stayed away from the market, are now participating in unprecedented numbers. Demat accounts have skyrocketed from 40 million (4 crore) in 2020 to 160 million (16 crore) today.

This surge was catalysed by the seamless digital onboarding process that emerged during the COVID-19 pandemic. This process allowed investors to open a Demat account and start investing in mere minutes. Consequently, the market saw a dramatic increase in new investors, with monthly figures rising from 3,00,000 to 4 million. Last month alone, 4.2 million new accounts were opened, thanks to enhanced digital infrastructure.

In the last four years, the retail investor base has expanded from 40 million to 163 million, with projections suggesting it could reach 300 million (30 Crore) in the next 3 to 4 years. This influx of retail investors means a significant portion of household financial savings is now being funnelled into the market. A key catalyst for this incredible growth is one of SEBI’s noteworthy initiatives, which is prioritising capital formation, making it easier for retail investors to invest and ensuring low costs, thereby maximising net returns for even the smallest investors.

India is now witnessing a revolutionary phase in equity investment. As this capital is injected into the economy, substantial growth follows. This dynamic is driven by our economy’s two key groups: entrepreneurs and consumers. Entrepreneurs create what consumers demand, thereby driving economic growth. Previously, a lack of equity stifled entrepreneurial ventures, but since 2020, we have seen a flood of equity. This shift is exemplified by the recent New Fund Offer (NFO) infusion of ₹40,000 crore, with monthly inflows now averaging ₹75,000 to ₹80,000 crore. Consequently, this results in an annual influx of ₹9 to ₹10 lakh crore into the market, significantly boosting entrepreneurial activity and fostering a hopeful outlook for economic development.

For entrepreneurs, this is a golden era in India, The AmritKal. With a market of 1.5 billion people in the country, the opportunities are vast. Entrepreneurs can pursue their ventures without queuing up for jobs, supported by global equity investment in promising ideas. Access to equity also paves the way for bank loans, creating a conducive environment for entrepreneurial success.

This surge in capital is not a short-term phenomenon but a structural change in the economy. The injection of ₹8 to ₹10 lakh crore annually will have profound effects, akin to diverting the Ganga’s waters to Rajasthan — initially causing floods, but eventually leading to a green revolution in the desert. India is on the brink of an entrepreneurship revolution, provided this influx is well-managed. SEBI is currently excelling in managing this investment flood, ensuring orderly money flow.

India’s well-regulated market attracts substantial investments. It is now up to the government to craft policies that leverage this capital influx strategically. Savers, who previously sought 6 to 7% interest, are now taking equity risks, marking a significant shift. The upcoming budget will reflect this transformation and shape policies accordingly.

This is an opportune moment. India’s capital markets should be harnessed for strategic advantage, particularly against global competitors like China.

Budget Expectations

Our current focus may not be on seeking tax breaks but rather on achieving a smoother tax administration. Removing bureaucratic hurdles is essential for fostering growth and efficiency. Our market infrastructure is already robust, well-planned, and designed for optimal performance. This is one of India’s key competitive advantages —a thriving, well-functioning capital market. The challenge before us is to leverage this advantage effectively for the nation’s benefit.

Just as software exports have been a boon, the capital market presents a similar opportunity. We must make our capital market the most efficient and reliable, attracting smaller neighbouring countries like the Philippines, Bangladesh, Sri Lanka, Pakistan, and Afghanistan to utilise our market. Why can’t India become the capital market hub for the subcontinent?

To achieve this, we must eliminate administrative irritants and create an enabling environment for investors and entrepreneurs alike.

(Raamdeo Agrawal is Chairman & Co-founder, Motilal Oswal Financial Services )

(As told to Lalatendu Mishra)

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Demat account – Artifex.News

Mutual funds on the rise: who’s investing the most?

Tax administration must be smoothened for capital markets growth

Budget Expectations