India's mutual fund sector continued its impressive expansion in fiscal year 2025-26, with average assets under management (AUM) climbing 12.2% year-on-year to a new high of ₹73.7 lakh crore. This significant milestone, detailed in SEBI's Annual Report 2025-26, underscores the increasing confidence and participation of Indian households in disciplined long-term investing.
Record SIP Growth Powers Industry Expansion
A key driver of this growth has been the sustained surge in Systematic Investment Plan (SIP) activity. The SEBI report highlights that active SIP accounts reached a record 10.45 crore by March 2026. Concurrently, average monthly SIP contributions saw a substantial 25.8% year-on-year increase, hitting an all-time high of ₹16,413 crore.
This consistent inflow from SIPs not only reflects a growing preference for regular, smaller investments over lump-sum amounts but also provides a stable source of domestic capital, helping to stabilize markets during periods of global economic uncertainty.
Broadening Investor Base Beyond Metros
The expansion of India's mutual fund industry is no longer concentrated solely in major urban centers. SEBI's findings indicate a notable increase in investor participation from Tier-II and Tier-III cities during FY2025-26. This geographical diversification suggests that mutual funds are increasingly becoming a mainstream investment avenue across the country, reaching a broader retail base.
Diversifying Investment Preferences
Investor preferences also showed diversification throughout the year:
- Passive Products: Exchange-traded funds (ETFs) and index funds continued their sustained growth, reflecting a trend towards lower-cost, diversified investment options.
- Gold ETFs: Inflows into Gold ETFs saw a sharp 4.6-fold increase compared to the previous year. This surge indicates a stronger demand for safe-haven assets amidst global geopolitical uncertainties, complementing traditional equity investments.
Domestic Investors Bolster Capital Markets
The robust growth in mutual fund assets coincided with heightened activity from domestic institutional investors. SEBI reported historic net inflows of ₹8.5 lakh crore from domestic institutional investors during FY2025-26. These inflows played a crucial role in offsetting net foreign portfolio investor outflows, thereby contributing to overall market stability.
The report underscores the increasingly vital role of domestic savings in India's capital markets, with mutual funds effectively channeling household investments into various financial assets. This growing participation by domestic investors, particularly through systematic investing, is strengthening India's long-term savings ecosystem and deepening its capital markets.