Rise in Retail Participation: Individual Investors Hold 61.4% of MF AUM

The mutual fund industry has witnessed a remarkable shift in investor participation, with individual investors now accounting for 61.4% of the total assets under management (AUM) as of December 2024. This marks an increase from 60.1% in December 2023, reflecting a growing preference for mutual funds over traditional investment avenues.

In absolute terms, the assets held by individual investors surged by 40%, rising from ₹30.70 lakh crore in December 2023 to ₹42.58 lakh crore in December 2024. This trend highlights the increasing comfort of retail investors with market-linked investments, driven by rising financial awareness and accessibility to digital investment platforms.

Shifting Investment Preferences Among Young Investors

A significant factor behind this surge is the changing mindset of young investors. Unlike previous generations, which leaned heavily towards fixed deposits, gold, and real estate, the younger demographic is showing a strong inclination towards equities and mutual funds. This generational shift is propelling the contribution of individual investors in the mutual fund industry’s total AUM.

The overall mutual fund industry experienced a 36% growth in AUM, expanding from ₹51.09 lakh crore in December 2023 to ₹69.33 lakh crore in December 2024. This surge reflects a broader trend of increasing reliance on mutual funds for wealth creation and long-term financial planning.

Institutional Investors Maintain Their Presence

Despite the rise in retail participation, institutional investors still play a vital role in the industry, accounting for 38.6% of total assets. Their holdings grew 31.20%, from ₹20.39 lakh crore in December 2023 to ₹26.75 lakh crore in December 2024. Corporates dominate institutional investments, holding 94% of institutional AUM, with the remaining portion managed by Indian and foreign institutions, as well as banks.

Equity-Oriented Funds Take Centre Stage

Equity-focused mutual funds have emerged as the preferred investment avenue, now representing 60.6% of the industry’s total AUM, up from 56.5% in December 2023. This category has witnessed a surge in contributions, with individual investors accounting for 88% of equity fund assets.

This shift towards equities has been fuelled by:

• Strong market performance, leading to increased optimism and risk appetite.
• Taxation changes in debt mutual funds, making equity investments more attractive.
• High inflation, which has diminished the real returns on fixed-income investments.

Systematic Investment Plans (SIPs) have also played a crucial role in this trend, with the bulk of SIP inflows directed towards equity funds. However, this shift has led to an imbalance in asset allocation, with a reduced focus on diversification between debt and equity.

Decline in Debt and ETF Market Share

While equity funds flourished, debt-oriented schemes experienced a decline, with their share dropping from 17.5% in December 2023 to 14.6% in December 2024. This reflects investors’ hesitation towards fixed-income instruments in an environment of rising equity market returns.

Similarly, exchange-traded funds (ETFs) saw a marginal dip in market share, reducing from 12.9% in December 2023 to 12.3% in December 2024.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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