Household investments in the Indian securities market reached unprecedented levels in FY25, with mutual funds emerging as the primary driver of this growth. The total household savings through the securities market nearly doubled to Rs 6.91 lakh crore from Rs 3.58 lakh crore in FY24, reflecting a significant shift towards financial assets.
Equity investments in the primary market saw robust traction, with household flows into equities through IPOs, FPOs, rights issues, and preferential allotments rising to Rs 95,139 crore in FY25, more than double the Rs 46,879 crore recorded in FY24. Mutual fund investments in the primary market soared 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 increased sharply to Rs 30,885 crore in FY25 compared with Rs 9,783 crore in the previous year, bringing the total flows to Rs 5.43 lakh crore.
The article by Dr. Prabhas Kumar Rath, Shyni Sunil, and Kalyani H highlighted a structural shift in household savings behavior, with financial assets gaining preference over traditional avenues like gold and real estate. SEBI's 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 evident 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. Meanwhile, 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.
SEBI noted that 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.
The shift towards financial assets is a crucial component of financial savings, with data on household savings reported by RBI relying partly on estimations. SEBI's data on mutual fund investments, along with a percentage of equity and debt issuances, were used by MoSPI in the computation of Gross Savings in the economy.
Background
The Indian securities market has been witnessing a gradual shift in household investment patterns, with a growing preference for financial assets over traditional investments like gold and real estate. This trend is indicative of the increasing financial literacy and awareness among Indian households, as well as the broader availability of investment options.
As household participation in financial markets continues to grow, the focus will likely remain on mutual funds and equities as preferred investment avenues. Monitoring these trends will be essential for understanding the evolving landscape of household savings in India.
