Inside the David vs Goliath battle in India’s mutual fund industry

“This keeps us busy for months. We never have to wonder what to do over the weekend,” he said.

But this abundance of choice, while delivering gastronomic delights, creates a dilemma in another far more important area—investments.

“Every week we hear about a new fund house or scheme being launched. Just when I narrow down on one option, another comes along that looks even more attractive,” he said. “In theory, you would want to study fund performance, investment style, risk profile and how well it aligns with your financial goals. But in practice, very few people have the time or expertise to do all that consistently.”

So Madhav ends up relying on simple cues like rankings on third-party websites, social media chatter, or recommendations from friends. Then, he hopes for the best.

Madhav is not alone. India’s rapidly expanding mutual fund universe, fuelled by a surge in retail participation and an explosion of new product launches, is leaving investors spoilt for choice. From passive and thematic funds to sector-specific and factor-based offerings, asset managers are racing to carve out niches in an increasingly crowded market.

For investors, while the sheer variety promises more opportunities, it raises the risk of confusion, duplication and impulsive investing driven more by marketing buzz than long-term suitability.

Yet, beneath this functioning chaos lies an intensifying contest—one that could shape the future of India’s ₹74-trillion mutual fund industry.

Explosive growth

The mutual fund industry in India traces its origins to 1963, with the formation of UTI through an Act of Parliament. It initially operated under the regulatory and administrative oversight of the Reserve Bank of India (RBI). Over time, public sector institutions entered the space, including banks such as the State Bank of India and insurers like the Life Insurance Corporation of India and GIC, gradually broadening the industry’s footprint.

The most significant inflection point, however, has come in the post-covid-19 pandemic period, as a growing number of Indians entered the equity markets amid rising financial awareness and the steady financialization of household savings. Mutual funds have emerged as the preferred gateway, particularly through the convenient systematic investment plan (SIP) route.

Monthly SIP inflows, which stood at ₹8,055 crore in 2019, have swelled to ₹32,087 crore as of March 2026. The number of folios has expanded from 82 million to 270 million during the same period, underscoring the depth and breadth of this retail wave.

The investor boom has naturally been mirrored on the supply side. The number of asset management companies (AMCs) has crossed the 50 mark, up from 42 in 2019 with 11 more licences in the pipeline, intensifying competition in an already crowded field.

Different strokes

For the newer entrants, while the opportunity is no doubt immense, challenging entrenched incumbents will require more than incremental tweaks—it demands a fundamental rethink of the playbook, ranging from marketing and distribution channels to the challenges of stock picking. This is especially true for a product bound by strict regulatory guardrails, which inherently limits the room for differentiation.

Take the case of AlphaGrep Investment Managers, one of the country’s largest proprietary trading firms known for high-frequency strategies, which recently received final approval from the Securities and Exchange Board of India (Sebi), the market regulator, for launching a mutual fund. The firm believes that like in the US, where active quant strategies are the second-largest category after passive funds, a similar trend will emerge in India.

“Technology now allows access to large amounts of data. Because of this, market cycles are becoming sharper and shorter as data can be processed much faster,” said Bhautik Ambani, associate director and chief executive officer at AlphaGrep.

While some mutual funds in India have started using quant models, AlphaGrep says its key advantage comes from its proprietary trading business. It has access to high-quality, diverse and long-term historical data, which is critical for building strong quant models and may not be easily available to others. The firm believes this edge in active quant investing will help it gain market share.

While some are playing on product uniqueness, others are experimenting with strategies to scale.

In a market with cut-throat competition where convincing distributors to sell a new mutual fund’s product is very difficult without paying them hefty commissions, The Wealth Company mutual fund is trying something different. Instead of competing for existing distributors, the firm is focusing on expanding the distributor base by training new entrants and bringing them into the ecosystem.

Unlike the insurance sector, where agents typically sell products of a single company, mutual fund distributors work with multiple AMCs. This reduces the incentive for fund houses to invest in training new distributors.

“We have motivated and helped around 15,000 individuals learn about the mutual fund industry and be interested in becoming professional financial intermediaries. Around 700–800 have so far completed the set of trainings and are now empanelled with us,” said Debasish Mohanty, chief strategy officer, The Wealth Company Mutual Fund.

Another entrant counting on its distribution muscle is Choice Mutual Fund, which started operations in October last year. Choice MF comes with its own distribution network benefiting from the fact that its parent entity is a broking company and has its own set of clients and branches where it can cross-sell.

“Not many players entering the mutual fund industry bring the distribution advantage upfront,” said Manish Jain, CEO at Choice Mutual Fund.

A lot of brokers have tested this model before. Take Zerodha Fund House. It has already crossed ₹13,000 crore in AUM after being in operation for over three years by using the same trick—use the already acquired broking customers and cross-sell mutual funds to them.

Choice Mutual Fund also has an advantage of having a network beyond the major cities which may help it attract flows from beyond the top 30 cities (B30 in industry parlance), an advantage not every broking-led AMC may have. It has a total of 217 branches. Fifteen of these are in major cities like Mumbai, Bangalore, Pune, Delhi, and Kolkata, while the rest are in tier 2 cities and beyond.

“Getting flows from B30 could be a tick mark for others, but for us, it could be a well-crafted strategy,” said Jain.

JioBlackRock, which made a big-bang debut last year with a digital-first approach of offering mutual funds to investors directly via its app and website, too acknowledged the importance of physical distribution in a market like India.

“Digital-first doesn’t mean digital only. We were clear from the start that for us, physical distribution will be a question of when, not if,” Sid Swaminathan, CEO of JioBlackRock AMC, told Mint on the sidelines of a distributor outreach programme it held recently. “We are starting off with specialized investment funds (SIFs), which will be offered by distributors. Soon, they will also distribute our mutual funds. So for us, it will be a hybrid strategy."

That said, he underscored that the digital approach has paid off handsomely for the AMC, which has garnered over 1.1 million investors within 10 months of its launch.

Then there is another set of mutual funds trying to stand out in a crowded market, not through products alone but through people.

These funds are led by well-known faces. Most of these fund managers come from the alternatives space, where they built a strong track record in portfolio management services (PMS) and alternative investment funds (AIF) strategies. Over time, they also built a loyal following. Now, as they enter the mutual fund space, they are bringing that reputation with them.

At an industry event in Mumbai, this trend was hard to miss. When Sunil Singhania of Abakkus Mutual Fund walked into the venue, a crowd quickly formed around him. People queued up for photographs; it felt less like a finance gathering and more like a celebrity sighting—the only difference being that the celebrity was a fund manager.

Saurabh Mukherjea of Marcellus Investment Managers and Deepak Shenoy of Capitalmind belong to a similar league.

For older, established AMCs, this trend creates a subtle but growing disadvantage. Over the years, several well-known fund managers, once the public face of large fund houses, have moved on to launch their own PMS or AIF platforms. In some cases, they helmed newer AMCs, taking with them both track record and investor recall. These include names like Prashant Jain, Samir Arora Pankaj Tibrewal and Kenneth Andrade, among others.

While a strong public presence can bring immediate visibility and recall, it takes a lot more to succeed in this competitive market, as many fund houses have found out.

Tough pitch

The mutual fund market is top-heavy. Currently, the top five funds control 56% share of assets.

While the spate of new AMC launches and the expanding investor base paint a rosy picture, they also mask a harsher reality—the business is far from easy.

Many mutual funds that launched in India over the years have struggled to sustain themselves, often forced into a trade-off between scale and profitability. For a large part of the industry, balance sheets have remained under pressure, weighed down by the high commissions paid to distributors in the race to gather assets.

AMCs earn via the expense ratio which is paid by the investor. A part of it is distributor commissions and the rest is kept by the AMC for managing its expenses. Many new AMCs dole out high commissions, leaving them with little money to manage expenses.

Before 2018, AMCs were allowed to pay up-front commissions to distributors which would make matters even worse. The AMC would shell out money even before it earned something. Even now, 54.9% of the total mutual fund assets, and 68% of the total equity mutual fund assets come via distributors, as of March.

Fidelity Mutual Fund, Baroda Pioneer Mutual Fund and JP Morgan Mutual Fund are examples where the economies of scale couldn’t be reached, leading to red balance sheets.

Fidelity was sold to L&T Finance, which is now HSBC Mutual Fund. JP Morgan MF was sold to Edelweiss Mutual Fund, while Baroda Pioneer is now a joint venture between BNP Paribas Asset Management and Bank of Baroda.

Mirae Asset Mutual Fund, backed by its South Korean parent, stands out as a rare foreign entrant that has managed to sustain its presence in India while also achieving profitability.

“When we started, multiple funds had similar portfolios and there were high upfront commissions, aggressive distributor payouts, and even foreign trips driving sales. The product was secondary,” said Swarup Mohanty, vice chairman & CEO at Mirae Asset Investment Managers (India). “We were a small fund. We could have taken the same path of incentivization but we stopped paying upfront commissions in 2012 and moved to trail-based commissions,” he said.

Trail-based commissions are paid after the investor is onboarded and are paid till the time the investor stays onboard.

“We educated distributors on why this is better. Then we chose to launch only one fund per category and manage them well. No unnecessary product expansion. As a result, we were able to build conviction on our story and keep the balance sheet healthy,” Mohanty added.

That said, mutual fund executives maintain it remains difficult to break even.

AMCs struggle to manage costs because they face largely fixed expenses—like talent, technology, and compliance—while revenue grows slowly and depends on building AUM over time. This mismatch, combined with thin fee margins, makes profitability difficult until the business reaches sufficient scale.

Examples of mutual funds operational for more than three years and still loss-making include Taurus Mutual Fund, Groww Mutual Fund and Samco Mutual Fund, among others, as of FY25. The FY26 financials have not yet been published.

Mails sent to the three AMCs named above did not elicit a response.

Simple is cute?

The explosion of choice in the mutual fund universe, while a sign of a maturing market, comes with its own set of challenges. For many investors, more options do not necessarily translate into better decisions but often lead to confusion and reliance on shortcuts.

However, this is also one of the main reasons why incumbents do not appear overly worried at this stage—most retail investors want a trusted brand and simple products, they argue.

The proliferation of mutual funds, meanwhile, also marks the evolution of a more accessible and participative financial ecosystem. For fund houses, the message is clear: survival and success will hinge on building trust and demonstrating a distinct edge. In a ₹74-trillion industry that is still finding its equilibrium, the real contest is only just beginning.