India’s mutual fund industry has surpassed ~₹67 lakh crore in Assets Under Management (AUM), and we’re only scratching the surface of what’s possible.

What truly amazes me, having started when the industry managed just ₹1.5 lakh crore, is the infrastructure behind today’s INR 67 lakh crore figure—40+ Asset Management Companies, over 1,500+ schemes catering to every investment goal, over 2 lakh+ distributors, and the trust placed by Indians through more than 23 crore investor accounts. This represents India’s financial coming-of-age.

This growth story reflects a fundamental shift in how India approaches wealth creation.

And I, for one, am extremely bullish on the mutual fund story in India.

In today’s blog, I want to take you behind the scenes of this remarkable journey—one that I’ve had the privilege of witnessing from the front row. In this blog, I’ll cover –

The growth of the mutual fund industry in India
Key structural shifts that transformed investor behaviour
How mutual funds are reshaping wealth management for retail and HNIs
Why wealth creators need to consider a PMS of mutual funds

Let’s dive in.

The mutual fund journey in India: From scepticism to trust

The early days (Circa 2005)

Earlier, equity as an asset class was seen as risky. For first-time equity investors, the market felt speculative, inaccessible, and best avoided. Wealth creation meant fixed deposits, gold, or real estate—assets that felt tangible, safe, and familiar.

Mutual funds, especially equity-oriented ones, were still in the shadows—misunderstood by many, mistrusted by most. Awareness was low, access was limited, and long-term investing was rarely part of the conversation. Investors stuck to what they knew: fixed deposits, gold, and often, debt mutual funds. In 2005, debt schemes made up nearly 65% of the industry’s AUM—a share that climbed to 75% by 2014.

The turning points

What transformed this landscape? Several critical developments converged to reshape India’s investment culture:

1. The SIP revolution: Systematic Investment Plans (SIPs) exploded in popularity throughout the 2010s, with Asset Management Companies (AMCs) and Distributors promoting them as the ideal way to weather market volatility. The “Mutual Funds Sahi Hai” campaign effectively communicated the power of starting early with small contributions. By September 2021, SIP contributions crossed INR 10,000 crore per month, showcasing the growing investor discipline. Since then, SIP contributions have only grown.

2. Passive Funds: India historically was an actively managed funds market. But since the late 2010s, passive investing has gained serious traction. Index funds and Exchange Traded Funds (ETFs) tracking NIFTY, Sensex, or specific sectors have grown popular, especially among sophisticated investors and institutions.

The Employees’ Provident Fund started indexing a chunk of its portfolio, and many retail investors came to appreciate the low cost and simplicity of passive products. From a negligible <2% market share a decade ago, passive funds now comprise ~17.5% of the mutual fund. Global giant Vanguard’s influence is evident – investors are embracing the idea that if you “can’t beat the market, just join it” at minimal cost.

Indian AMCs have responded with a slew of index-based offerings. While active equity funds still dominate, this passive revolution has broadened the investor base and given cost-conscious HNIs new tools for diversification.

3. Direct Plans: SEBI introduced Direct Plans in 2013, offering investors a chance to bypass commissions and directly invest in mutual funds at lower costs. This shift was initially subtle, but with the rise of digital platforms and greater investor awareness, it became mainstream. As per AMFI data, today, Direct Plans account for ~40% of total AUM.

4. Digital adoption: A decade ago, mutual fund investing meant paperwork, physical KYC, and in-person visits. Technology has rewritten the rules of engagement. Aadhaar-based e-KYC, UPI integration, and digital-first platforms have removed traditional barriers to entry, creating a more inclusive ecosystem that’s bringing in first-time investors across India.

5. Regulatory support: The rapid growth and democratisation of India’s mutual fund industry from 2015 to 2024 was driven by key reforms:

Reclassification of MF Schemes (2017): Consolidated 2,000+ overlapping schemes into 36 clear categories.
Capping of Total Expense Ratio (2018): Made mutual funds more cost-effective, boosting returns.

Present reality: Weathering market storms

The past six months of market volatility have been a litmus test for Indian investors. And the results are encouraging. The average investor today is far more informed and grounded. They understand that cycles are part of the market’s rhythm—and that SIPs, if anything, matter even more when prices are falling. After all, where else can you consistently buy long-term assets at discounted valuations?

Despite the volatility in the last 6 months, investors stayed their course:

December 2024 marked an all-time high in SIP inflows—INR 26,460 crore
March 2025 followed with INR 25,930 crore (flat QoQ, up 35% YoY), maintaining momentum despite volatility

That’s not retail FOMO. It’s a structural shift in how India thinks about long-term investing.

The road ahead

A recent PwC report paints an ambitious picture of India’s mutual fund industry:

By 2047, the number of retail investors is expected to grow sixfold
The average investor’s AUM is projected to rise by 10x
These forces could push India’s mutual fund AUM-to-GDP ratio past 100%—a milestone that would place us alongside the world’s most mature financial markets

If this plays out well, we are set to witness a transformation in how India saves, invests, and builds wealth.

However, mutual fund penetration in India remains astonishingly low relative to developed markets. India has about 5.4 crore unique mutual fund investors as of March 2025. That’s roughly 3–4% of our 1.4 billion population – under 5% penetration. Even if we consider the working population or households, it’s still well under 10%. In stark contrast, over half of American households invest in mutual funds. In 2023, about 52.3% of U.S. households owned mutual funds (over 116 million individual shareholders).

This comparison highlights a huge opportunity in India. As our economy grows and financial literacy improves, the investor base could expand dramatically. Association of Mutual Funds in India’s (AMFI) vision document projects the number of mutual fund investors to grow 5x from 4.5 crore in 2023 to 26 crore by 2047. Correspondingly, AUM is forecast to explode – possibly reaching INR 280 lakh crore or more by 2047, rivalling the size of India’s banking deposits and even GDP. In other words, we are still in the early innings of mutual fund growth in India.

How India’s mutual fund industry is reshaping wealth management

As I’ve explained above, there is ample data to prove that mutual funds have established themselves as preferred instruments for equity exposure due to their distinct advantages:

Diversification across asset classes, market caps, and investment styles
Professional management backed by research analysts, economists, and risk managers who construct expert-led portfolios through deep due diligence that individual investors would struggle to replicate
Regulatory transparency through SEBI’s comprehensive oversight

Emerging trends

Recent data reveals fascinating shifts in how Indians are investing in mutual funds:

B30 (locations beyond the top 30 cities – typically Tier 2 and Tier 3 cities) AUM growth outpaced T30 (Top 30 cities) AUM growth, with B30’s share of industry AUM rising from 16% in December 2020 to 18% in March 2025
Individual investors now dominate equity schemes, contributing 88% of AUM.
Passive investment strategies are gaining momentum, with their share rising from 10% of total AUM in March 2021 to 17% in March 2025. Passive fund folios have grown approximately 16 times in the last five years.
Geographic diversification is accelerating as mutual funds penetrate beyond metro cities:

B15 cities (those which are beyond these top 15 cities) share increased from 26% in December 2019 to 35% in December 2024
B30 (locations beyond the top 30 cities – typically Tier 2 and Tier 3 cities) AUM growth outpaced T30 (Top 30 cities) AUM growth, with B30’s share of industry AUM rising from 16% in December 2020 to 18% in March 2025

The wealthy are embracing mutual funds too

High-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) have traditionally gravitated toward traditional avenues like real estate, Fixed Deposits, gold and sophisticated investment vehicles like hedge funds and private equity. However, mutual funds have become an essential component in their diversified portfolios now.

According to AMFI data, HNIs now constitute 34% of the total monthly average AUM, and when it comes specifically to equity funds, an impressive 42.5% of AUM can be attributed to HNIs.

For these affluent investors, mutual funds serve as complementary instruments alongside their existing investments, providing the perfect balance of professional management, diversification, and liquidity.

The challenge: Selecting the right mutual funds

Our analysis of over 5.3 lakh mutual fund portfolios (representing approximately INR 100,000 crores in investments) through Dezerv’s Wealth Monitor revealed over 80% of portfolios underperformed the respective benchmarks – a substantial opportunity cost.

The reason investors do not create wealth is due to the absence of a solid investment framework. Investors, even sophisticated ones, struggle to:

Choose equity instruments that align with their risk-return expectations
Select the correct products within those categories
Build a coherent overall strategy that optimises returns while managing risk
Actively manage their investments with expertise and data

The solution: PMS of Mutual Funds – The best of both worlds

To address these challenges, we’ve built the Dezerv Equity Revival Strategy (ERS), an investment approach of Portfolio Management Services (PMS) which currently invests in mutual funds designed to control downside risk while aiming to deliver outperformance.

Many investors mistakenly believe that a PMS of direct stocks always generates higher returns than mutual funds. This may not always be the case.

What many don’t realise is that PMS structures aren’t limited to direct stocks; they can incorporate mutual funds and bonds as well. This creates a powerful combination:

The cost and tax advantages of mutual funds
The active management of PMS
Professional oversight that addresses selection challenges

This approach is particularly well-suited for HNIs and UHNIs who seek both the advantages of mutual funds and the tailored management of a PMS structure.

The future: Unlocking the industry’s full potential

The future growth of India’s mutual fund industry hinges on two critical factors:

Enhanced accessibility through digital platforms and broader reach
Unbiased, personalised investment solutions that cater to specific investor needs

Strategic collaborations between WealthTech firms and traditional AMCs will be crucial, merging digital agility with established trust and reach to drive innovation and create tailored investment products.

Consider this: India’s top 1% controls an astounding INR 500 lakh crore in wealth – an amount projected to double in just six years through market appreciation alone. Yet, it is estimated that the largest wealth managers in India currently manage less than 1% of this wealth actively.

This represents an unprecedented opportunity for the wealth management industry, particularly for those offering sophisticated mutual fund solutions that address the unique needs of India’s expanding affluent demographic.

For HNIs and UHNIs seeking optimal returns with professional management, the combination of mutual funds within a PMS structure represents the perfect synthesis of diversification, expertise, and personalised strategy – exactly what today’s sophisticated investor demands.

What should investors do?

For those already invested:

Congratulations and well done! You’ve not only understood the power of mutual funds but have also created wealth for yourself on the way.

Stay the course by maintaining your long-term strategy and avoid impulsive decisions, irrespective of market ups and downs.
Lumpsum investments: In times like this, be strategic about your lumpsum investments and stagger them over 6-9 months.
SIPs: When it comes to SIPs, this is not the time to stop them. Doing so breaks the fundamental premise of unit cost averaging and often results in missing the most meaningful phase of compounding.

A common question is whether picking the “best” day for a monthly SIP boosts returns. Intuition might say yes – invest just after a market dip each month. But data tells a different story. A study of SIPs on different dates found negligible differences in long-term outcomes. There is no magic date. Whether you invest on the 1st or 15th, results over 5–10+ years are virtually the same. The lesson: focus on starting and continuing your SIP, not fretting over monthly timing. Consistency trumps cleverness here.

What about timing the market in a bigger sense – say, stopping SIPs during a downturn to avoid “catching a falling knife”? That often backfires. By trying to time a re-entry, one might miss the sharp rebounds that characterise market recoveries. The better strategy is to keep automating your investments. SIPs actually thrive in down markets, as illustrated below.

Consider rebalancing if needed to maintain your target asset allocation.
Review your portfolio. This is the most important step during such periods. Assessing where you stand, how your investments are faring and identifying underperformance are key to wealth creation.

The Wealth Monitor helps investors track their mutual fund and stock portfolios and is trusted by more than 5.3 lakh users with around INR 1.15 lakh crore in Assets Under Tracking (AUT). It’s easy to use and completely free. Interestingly, more than 80% of our clients undergo a quarterly portfolio review with us.

For those not yet investing:

Consider this your sign to start leveraging mutual funds in your wealth creation journey: market downturns can be the best time to start. With attractive entry points, even modest contributions can lay the groundwork for long-term wealth creation.

In summary

The incredible growth of India’s mutual fund industry speaks volumes about the collective effort of stakeholders across the ecosystem—from asset managers to distributors and investors to regulatory bodies. Each of these players has played a critical role in building a strong foundation for the industry to thrive.

I’m extremely grateful that I’ve got a front seat view of this incredible mutual fund journey in India. As this industry grows further, we at Dezerv couldn’t be more excited to be at the forefront – building solid data-driven strategies, creating content that helps investors make more informed decisions, putting our clients first always and most importantly playing an integral role in the wealth creation journeys of India’s top wealth creators.

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Disclaimer: Our licenses: Dezerv Investments Private Limited is a Portfolio Manager with SEBI Registration no.INP000007377. Distribution services are offered through Dezerv Distribution Services Private Limited, a wholly owned subsidiary of Dezerv Investments Private Limited (collectively referred to as “Dezerv”) with AMFI Registration No.: ARN- 248439 and APMI Registration No.: APRN -00615.
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