Great Indian Asset Allocation: Mutual Funds To Equities—Common Man Prefers Investments Over Savings In 2025

India’s household wealth has seen a structural transformation in the last few years, with a shift from traditional savings to capital market-linked investments. According to a report How India Invests 2025 released by Bain & Company in partnership with domestic brokerage Groww, mutual funds and direct equities (stocks) have emerged as the fastest-growing asset classes in India, outpacing deposits over the last five years.

Growth driven by increasing financial literacy, robust market performance, strong regulatory support, and a proliferation of digital-first investing platforms have contributed to the paradigm shift in the collective mindset of Indian households. These factors have led to the rapid change from a savings mindset to an investment mindset to prioritise asset allocation.

Over the next decade, individuals' mutual fund assets under management (AUM) in India are projected to exceed Rs 300 lakh crore, as per the report. Household penetration is expected to double to ~20%, with growth coming primarily from mass market, mass affluent segments in top cities along with affluent and mass affluent segments in India's tier-2+ cities.

Meanwhile, direct equity holdings are expected to approach Rs 250 lakh crore by 2035, with the key enabler being a shift from short-term speculative investing to long-term wealth creation. Over 12 crore investors are expected to enter the market for equities in the next 10 years.

A “digitally native, demographically diverse investor base” has resulted in the shift towards investment attitude. In the last five years, digital platforms accounted for 80% of direct equity investors and nearly 35% of mutual fund investors. The report highlighted that there has been a consistent shift from speculative trading in direct equities to long-term mutual fund investing through systematic investment plans or SIPs.

Domestic benchmarks Nifty 50 and Sensex have delivered 10%–15% returns in the last 10 years, reinforcing the long-term value of equity investing. Salaried individuals had the highest allocation to MFs via SIPs, while business owners skewed more towards direct equities.

Data also showed that Gen Z investors are more reactive to market movements, while salaried Gen X investors exhibit more steady behavior. Dematerialized accounts grew nearly five times over the last five years, because of a post-pandemic boom in initial public offerings or IPOs.

"Regulatory support and strong investor protection measures have led to an investor shift toward capital markets. As more outreach efforts—via regulators, digital platforms and influencers—increase, the investor base will expand," said Monika Halan, Chairperson, IPEF, SEBI.

According to the report, mutual fund penetration across Indian households may double from 10% to 20% over the next decade. MF folios have grown 2.5x in five years, yet individual gross flows have increased by just 7%, underscoring the entry of a large cohort of new investors with smaller ticket sizes.

The average monthly SIP inflows have risen at an estimated 25% CAGR over the last decade, driven largely by 18 to 34-year-olds, a demographic which is increasingly shaping the direction of domestic capital markets.

Younger investors under 30 now represent 40% of NSE-registered investors, compared with 23% in FY19, underscoring the generational shift driving India’s capital markets, according to the findings of the report.

Coming to equities, individual direct equity holdings reached Rs 42 lakh crore by FY25 end, due to an increase in penetration. Discount brokers are gaining share among active clients, driven by the need for easy and affordable access to the direct equity market after the COVID pandemic.

Hence, the report also concludes that D-Street's equity AUM expected to reach approximately Rs 250 lakh crore by FY35, driven by a rise in digital adoption, investor behavioral shift, and strong market performance.