India Is Learning To Invest — Compounding Is Its Next Test, Says Groww-Bain And Co Report

India's household investing story is in the middle of a quiet but consequential shift. Savings are steadily moving out of fixed deposits and physical assets and into capital markets, even as the country remains far behind global peers in terms of how much household wealth is invested.

Yet, even as participation rises sharply, fresh data suggests India's real challenge lies not in getting people to start investing — but in getting them to stay invested long enough for compounding to work.

According to the Bain & Company–Groww ‘How India Invests 2025’ report, Indian household wealth stood at Rs 1,300–Rs 1,400 lakh crore in FY25, growing about 13% over the past five years. Of this, investable financial assets make up roughly 35%.

Mutual funds and listed equities have been the fastest-growing asset classes, overtaking bank deposits in growth rates. Still, just 15–20% of household investable assets are allocated to capital markets — compared with 50–60% in developed economies such as the US and Canada.

That gap underscores both the opportunity and the risk. Individual mutual fund assets under management have climbed to about Rs 41 lakh crore, largely because household penetration has doubled from 5–6% to around 10-11% over five years.

"What we are seeing is participation-led growth," said Rakesh Pozhath, Partner at Bain & Company. "The number of investors has gone up exponentially, but per-household AUM hasn’t compounded at the same pace. That’s typical of early-stage markets—but compounding comes later, with a lag."

The report notes that in mature markets, wallet deepening typically follows penetration with a five-to-ten-year delay. For India to reach its long-term ambition of a $30 lakh crore economy by 2047, Bain estimates mutual fund penetration would need to rise to roughly 35% of households, with capital market assets approaching 80% of GDP.

Systematic Investment Plans have become the backbone of this shift. Monthly SIP inflows have grown at roughly a 25% CAGR over the past decade, and SIPs now account for about 31% of mutual fund AUM, up from 19% five years ago. Yet the average SIP ticket size remains modest at around Rs 3,000, reflecting the influx of first-time and small-ticket investors.

Geographically, around 55–60% of new SIP registrations now originate from B30 cities, and nearly half of digital platform investors come from Tier-2 and smaller towns. Platforms like Groww have played a key role in this expansion, accounting for roughly 35% of mutual fund investors and nearly 80% of direct equity investors.

"Access is no longer the constraint," said Harsh Jain, Co-founder and CEO of Groww. "With mobile-first platforms, regional-language content and low-ticket SIPs, investing is possible from anywhere. The focus now is on helping investors build long-term habits, not just enter markets."

Demographically, younger investors are driving momentum. Investors under 30 now account for about 40% of NSE-registered investors, up from 25% five years ago. The report shows Gen Z investors are the fastest-growing cohort but also the most reactive to market movements, with higher exposure to mid-cap, small-cap and thematic funds.

Retail investors incurred losses of over $2.2 lakh crore in derivatives trading between FY22 and FY24, prompting the Securities and Exchange Board of India to tighten F&O norms. Bain argues these steps are nudging investors towards longer-term, lower-churn strategies.

Encouragingly, the share of mutual fund holdings held for more than five years has more than doubled in the past half-decade — an early sign that patience may be taking root. But the report is clear: India is still learning to invest. Whether it learns to compound will define the next phase of its growth story.