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

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