MF AUM likely to breach Rs 300L cr mark by FY35: Report

Indian households are steadily shifting from a traditional savings mindset to a more investment-oriented approach, with mutual funds and direct equities emerging as the fastest-growing asset classes in recent years - Saurabh Trehan, Partner, Bain India

New Delhi: Mutual fund assets under management (AUM) are projected to exceed Rs 300 lakh crore by 2035, with direct equity holdings expected to reach Rs 250 lakh crore over the same period, according to a joint report by consulting firm Bain & Company and investment platform Groww.

This growth is driven by rising retail participation and a deepening digital adoption, the report said. According to the report titled ‘How India Invests’, mutual fund penetration across Indian households is expected to double from 10 per cent to 20 per cent over the next decade. The next wave of growth in the mutual fund industry will be driven by “increasing household adoption, strong digital enablement, supportive regulation and growing investor trust”.

On the other hand, the expected growth in equity participation can be attributed to the shift from speculative trading to long-term investing, in addition to continued digitally driven penetration and strong market performance. The Securities and Exchange Board of India (Sebi) has introduced several stringent measures to curb excessive speculation and manage risk in the derivatives market. These rules encourage investors to move toward steadier, wealth-building instruments by making speculative futures and options (F&O) trading less accessible and more costly for retail participants.

A recent Sebi study revealed that 93 per cent of individual traders incurred losses in equity F&O (Futures & Options) between FY22 and FY24. The report said that about 9 crore incremental retail investors are expected from Gen Z and millennials, led by higher digital adoption and growing financial literacy. Saurabh Trehan, Partner & Head of Bain India’s Financial Services practice, said that “Indian households are steadily shifting from a traditional savings mindset to a more investment-oriented approach, with mutual funds and direct equities emerging as the fastest-growing asset classes in recent years.”

He added that “as more households, especially young and first-time investors and those beyond the top 30 cities, embrace market-linked products and longer holding periods, we’re seeing the emergence of a deeper and more resilient domestic investor base”. The report revealed that long-term investing behaviour is strengthening, with the share of over-five-year mutual fund holdings rising from 7 per cent to 16 per cent, and over-five-year SIP (Systematic Investment Plan) holdings increasing from 12 per cent to 21 per cent. According to the report, younger investors, women and households in smaller cities are driving the expansion of the country’s investor base.