India's mutual fund industry is entering a robust growth phase, with its assets under management (AUM) anticipated to double from approximately ₹65 lakh crore in FY26 to a staggering ₹130 lakh crore by FY30. This optimistic forecast, shared by Ganesh Mohan, MD of Bajaj Asset Management, underscores a significant shift in how Indian households are managing their financial savings.
Structural Shift Driving Growth
A key factor propelling this expansion is a fundamental change in household financial behavior. The proportion of savings allocated to mutual funds and equities has notably increased from 8% to 15%. Simultaneously, the share of traditional currency and bank deposits has decreased from 48% to 41%. This indicates a growing appetite for market-linked investments among the populace.
Mohan emphasized that this is a “structural shift,” with mutual funds and equities nearly doubling their share in household financial savings in FY25 alone, creating a strong foundation for sustained industry growth.
Equity Funds Lead the Charge
The burgeoning interest in mutual funds is clearly reflected in the performance of equity funds. In July, equity mutual fund assets hit a record ₹48.5 lakh crore, constituting 56% of the industry’s total average assets under management (AAUM), according to the NSE Market Pulse report for August. Both equity and hybrid AAUM reached new highs during this period.
Active equity schemes continue to be a primary growth engine, witnessing a 13.3% year-on-year increase and representing nearly 78% of total equity AUM. These schemes alone accounted for 44% of the overall mutual fund AAUM.
Popular Equity Fund Categories
Among open-ended equity schemes, certain categories have seen substantial investor interest:
- Flexi-cap funds: Largest share at 15.6%
- Thematic funds: 14.6%
- Mid-cap funds: 13.6%
- Small-cap funds: 11.5%
Together, these four categories comprise over 55% of the total equity AUM, highlighting diversified investor preferences within the equity segment.
Future Catalysts: Earnings, Investors, and SIPs
Mohan identified several factors expected to fuel the next phase of industry growth:
- Consistent earnings growth of 12–15%.
- Annual investor growth of approximately 15%.
- Systematic Investment Plan (SIP) volume growth of around 10–12%.
He further suggested that the market could soon transition into a “30% + CAGR corridor,” indicating potential for even faster expansion as investor participation deepens across the country.
Increasing Penetration and Digital Adoption
Despite the current growth, India's mutual fund penetration still has significant room for expansion. The country’s MF AUM stood at only about 21% of GDP in CY24, considerably lower than levels in other global markets like South Africa (34%), Malaysia (52%), and Brazil (72%).
The rise of direct investing is also playing a crucial role in widening participation. Currently, 45% of mutual fund investments are made through direct channels, a trend Mohan described as the “Rise in DIY investing” and a reflection of “Savers turning investors.”
However, increased accessibility also underscores the importance of informed investor behavior. Studies show investors have earned 2.5–5% less than their funds due to poor timing and other behavioral mistakes. Mohan stressed that “SIPs and asset allocation remain timeless tools for building long-term wealth,” and professional advice continues to be vital in an increasingly accessible investment landscape.