Investment trends shift from deposits to markets. Here's where Indians put their money in 2025

Indian households are undergoing a structural shift in investment behaviour, moving away from traditional deposits towards market-linked instruments and direct equities. According to Bain & Company, with trading platform Groww collaborating on the data for the How India Invests 2025 report, mutual funds and equities have emerged as the fastest-growing asset classes, outpacing deposits over the last five years.

The report projects that mutual fund assets under management (AUM) in India will exceed ₹300 lakh crore by FY2035, supported by sustained investor activity and deeper household penetration, particularly in smaller cities beyond the top 30. These ‘B30’ cities, as defined by the Association of Mutual Funds of India (AMFI), include locations such as Lucknow, Patna, Indore and Coimbatore.

How India Invests 2025 — What does the data show?

• The Bain report said Indian households are undergoing a “structural transformation” in wealth, with a shift from traditional savings to capital markets-linked investments.
• Noting that in this shift, mutual funds (MFs) and direct equities “have emerged as the fastest-growing asset classes, outpacing deposits, with growth driven by increasing financial literacy, robust market performance, strong regulatory support, and a proliferation of digital-first investing platforms”.
• In comparison to developed economies, however, India still trails when it comes to cumulative capital market assets.
• Despite seeing large growth, MFs and equity allocations comprise only 15-20% of household investable assets, compared to 50-60% in Canada and the United States.
• However, the conclusion drawn was optimistic, with the report adding that the current low penetration indicates space for further growth.

Why is Mutual Fund AUM projected to exceed ₹300 lakh crore in 10 years?

The report noted that over the next 10 years, it expects mutual fund AUM in India to exceed ₹300 lakh crore, as existing and new investors sustain and increase penetration in B30 cities.

“This growth can be attributed to an expansion of digitally enabled mutual fund distributors, registered investment advisers, and regulatory support for accessibility and awareness,” it added.

For direct equity holdings, the numbers are expected to reach ₹250 lakh crore, largely due to “shift from short-term speculative investing to long-term wealth creation”.

The report credited a “digitally native, demographically diverse investor base” for the shift in investment attitude, noting that in the past five years, digital platforms accounted for around 80% of direct equity investors and approximately 35% of mutual fund investors. It added that there has been a “consistent shift from speculative trading in direct equities to long-term mutual fund investing through systematic investment plans (SIPs)”.

Among various segments, salaried individuals had the highest allocation to MFs via SIPs, while business owners skewed more towards direct equities. In demographics, data showed that Gen Z investors tend “to be more reactive to market movements, while salaried Gen X investors exhibit more steady behavior”.

Paradigm shift: How has India's investing mindset changed?

As per the report, by the end of FY25, total Indian household wealth was between ₹1,300-1,400 lakh crore, up 13% over the past five years.

Mutual Funds

• Among these, mutual fund AUM for individuals reached ₹41 lakh crore during the same period, with growth primarily attributed to an increase in household penetration, from 5–6% to 10–11% over the last five years.
• Growing confidence in equity-based funds and SIPs and rising financial literacy have been key to this growth.
• Individuals’ mutual fund AUM are expected to continue their rapid growth, exceeding ₹300 lakh crore in the next 10 years, driven by both penetration increase and rising per household AUM.
• Meanwhile, household penetration is expected to double to ~20%, with growth coming primarily from mass market and mass affluent segments in top cities and from affluent and mass affluent segments in Tier-2+ cities.
• Growth in investment participation will come from increasing regulatory support and awareness, strong performance of mutual funds, the adoption of retirement-focused schemes, a growing distributor base, and the adoption of digital platforms.
• Per-household AUM growth typically shows a five to 10-year lag vs household penetration, based on the history of developed markets like the US and Canada. With the growing salience of long-term holdings (investments held for five years or more) and the growing share of disciplined SIP-led investing, per-household AUM is expected to grow to 20%–22% over the next decade.

Direct equity

• Individual direct equity holdings reached ₹42 lakh crore by FY25 end, due to an increase in penetration.
• Dematerialized accounts grew nearly five times over the last five years, because of a post-pandemic boom in IPOs.
• Factors that facilitated this include the ease of access through new-age digital players, shifting demographics in favour of younger investors, growing financial literacy, and digital public infrastructure support.
• The industry is expected to reach near ₹250 lakh crore in the next 10 years, with more than 12 crore investors expected to enter the market.

In addition to continued digitally driven penetration and strong market performance, the shift from speculative trading to long-term investing will be key to ensuring sustained industry growth.

5 ‘megatrends’ driving the shift toward investing

• New investor expansion: A growing segment of young and tech-savvy investors in Gen Z has emerged as a significant force, with the share of NSE registered investors under 30 years old increasing from ~25% in FY20 to around 40% in FY25. Further, there is expansion in Tier 1 cities, as 50-60% of new SIP registrations are from B30 cities.
• Proliferation of new-age digital platforms: The rise of app-based platforms, such as Zerodha, Upstox and Groww, has made investing paperless, accessible and user-friendly, as per the report. It added that these platforms contribute ~80% of the total number of retail equity investors in India.

• Government and regulatory push: A major factor is the reforms initiated by the Securities and Exchange Board of India (SEBI), which has removed the National Occupational Classification (NOC) requirement for mutual fund distributors (MFD). It added that scheme rationalisation and the uniform expense cap have built trust with investors. As per the report, support for digital and physical distribution with the introduction of platforms like MFCentral and MFD Empowerment, especially for Tier-2+ regions, has also helped.
• The report added that growing financial literacy in regional and digital financial content (eg, on YouTube, Instagram, and fintech apps) is making investing concepts more relatable to the masses. Increased awareness and a push from regulators driven by AMFI's campaigns, such as ‘Mutual Funds Sahi Hai’ and ‘Bharat Nivesh Yatra’, have gained significant traction.
• Strong market performance, led by the Nifty 50 and Sensex, which delivered returns of 10%–15% over the past 10 years, has reinforced the long-term value of equity investing, as per the report. It added that MFs, particularly equity-oriented ones, have outperformed traditional fixed deposits by a wide margin over the past five years.