Household investments in mutual funds reached a record Rs 5.43 lakh crore in FY25, marking a significant shift in savings behavior towards financial assets. This surge was driven by a robust increase in primary market investments and a notable rise in secondary market flows.
Equity investments in the primary market saw strong traction, with household flows into equities through IPOs, FPOs, rights issues, and preferential allotments rising to Rs 95,139 crore in FY25, more than doubling the Rs 46,879 crore recorded in FY24. The domestic households' trust in mutual funds emerged as the biggest driver of inflows, with investments through mutual fund schemes in the primary market jumping to Rs 5.13 lakh crore in FY25 from Rs 2.85 lakh crore in FY24 and Rs 1.66 lakh crore in FY23.
Secondary market mutual fund flows, including ETFs, also rose sharply to Rs 30,885 crore in FY25 compared with Rs 9,783 crore in the previous year. Together, these flows contributed to the record Rs 5.43 lakh crore in mutual fund investments. The article by Dr. Prabhas Kumar Rath, Shyni Sunil, and Kalyani H highlighted that household savings through the Indian securities market sharply increased to a record Rs 6.91 lakh crore, nearly doubling from Rs 3.58 lakh crore in FY24.
The data indicates a structural shift in household savings behavior, with financial assets increasingly gaining preference over traditional avenues such as gold and real estate. Sebi noted that the revised methodology now captures a broader set of investments, including secondary market participation, REITs, InvITs, and private placements, offering a more realistic picture of household participation in capital markets.
The growing appetite for mutual funds was also visible in the stock of household assets. Household mutual fund holdings climbed to Rs 44.39 lakh crore at the end of FY25 from Rs 36.28 lakh crore a year earlier and Rs 24.45 lakh crore in FY23. Even so, household ownership of equities continued to swell due to market appreciation and continued primary market participation. The value of household equity assets increased to Rs 88.92 lakh crore in FY25 from Rs 84.07 lakh crore in FY24 and Rs 53.67 lakh crore in FY23.
The revised methodology increased the household savings through securities markets-to-GDP ratio to 2.17% in FY25 compared with 1.71% under the earlier approach, indicating that the role of financial markets in household wealth creation had been materially underreported earlier.
Background
The shift towards financial assets over traditional savings avenues like gold and real estate highlights a growing confidence in the capital markets among Indian households. This change is partly attributed to Sebi's revised methodology, which provides a more comprehensive view of household participation in the securities market.
Looking ahead, the continued shift towards financial assets suggests a growing confidence in the capital markets among Indian households. Observers will be keen to see if this trend sustains and how it impacts the broader economic landscape.
