In Financial Year 2024-25 (FY25), India’s mutual fund industry experienced significant growth and transformation, marked by record-breaking inflows, regulatory reforms, and increased investor participation. Below is a comprehensive overview of the key developments and trends that shaped the industry during this period.
Industry Growth and Performance
- Record AUM Milestone: The mutual fund industry’s Assets Under Management (AUM) surpassed ₹70 trillion, marking a 22.25% year-on-year growth as of March 2025.
- Equity Mutual Funds Surge: Equity mutual funds witnessed unprecedented net inflows of ₹4.17 lakh crore, more than double the previous year’s figures, leading to a 25.4% increase in equity-oriented scheme AUM to ₹29.45 lakh crore.
- Mid and Small-Cap Attraction: Mid- and small-cap mutual funds attracted ₹30,350 crore in the first half of FY25, with their combined AUM rising 63% to ₹7.26 lakh crore by September 2024.
- SIP Contributions Rise: Systematic Investment Plan (SIP) contributions reached ₹259.3 billion in March 2025, reflecting a 34.5% year-on-year increase, highlighting growing investor confidence in disciplined, long-term investment strategies.
Investor Demographics and Behavior
- Retail Investor Growth: The share of individual investors in the overall mutual fund AUM composition increased from 60.1% to 60.9% between January 2024 and January 2025.
- Folios Expansion: The number of mutual fund folios reached 22.92 crore by January 2025, with retail investors accounting for nearly 91.6% of these accounts, indicating a significant rise in retail participation.
- Geographical Diversification: Investments from cities beyond the top 30 (B30 cities) accounted for 27.16% of individual assets, showcasing the industry’s expanding reach into smaller towns and cities.
Regulatory Reforms and Initiatives
- Mutual Fund Lite Framework: SEBI introduced the Mutual Fund Lite framework effective March 16, 2025, aimed at reducing compliance burdens for passive funds like index funds and ETFs, thereby encouraging innovation and accessibility.
- Specialized Investment Funds (SIFs): SEBI launched SIFs to bridge the gap between mutual funds and portfolio management services, targeting high-net-worth individuals with a minimum investment of ₹10 lakh.
- DigiLocker Integration: SEBI integrated DigiLocker for digital storage of Demat and mutual fund holding statements, enhancing access and reducing unclaimed assets.
- Insider Trading Regulations: SEBI extended insider trading regulations to include mutual fund units, ensuring enhanced regulatory compliance within the industry.
Product Innovations and Offerings
- New Fund Launches: ICICI Prudential Mutual Fund launched the Nifty200 Quality 30 Index Fund, focusing on financially robust companies with strong fundamentals.
- Micro-Investment SIPs: SEBI encouraged fund houses to introduce SIPs with minimum investments as low as ₹250, aiming to widen equity investing across the country, especially in smaller towns.
- Hybrid Funds Dynamics: Hybrid mutual fund schemes saw a moderation in inflows to ₹1.19 lakh crore in FY25 from ₹1.45 lakh crore in FY24, despite a 22% growth in AUM to ₹8.83 lakh crore, indicating investor caution amid market volatility.
Market Trends and Fund Manager Strategies
- Sectoral Preferences: Fund managers increased allocations to sectors like Telecom and Healthcare, with Healthcare becoming the fourth-largest holding by weight at 7.6%. Private Banks also saw increased portfolio weight, highlighting strategic shifts amid market volatility.
- Focus on Midcap Private Banks: Fund managers identified midcap private banks as offering attractive risk-reward opportunities due to favorable macro conditions and improving fundamentals.
Technological Advancements and Accessibility
- Digital Platforms Expansion: SBI launched ‘JanNivesh SIP’ with a minimum investment of ₹250, available on platforms like SBI YONO, Paytm, Groww, and Zerodha, aiming to encourage small-ticket investors and first-time participants.
- GIFT City Developments: GIFT City emerged as a prominent international financial services hub, attracting numerous fund managers catering to both Indian and foreign investors, complementing the growth of domestic Alternative Investment Funds (AIFs).
Taxation and Policy Proposals
- AMFI’s Budget Proposals: The Association of Mutual Funds in India (AMFI) released a 15-point proposal for Budget 2025, including restoring long-term indexation benefits for debt mutual funds and amending the definition of Equity Oriented Funds to include certain Fund of Funds.
Conclusion
FY25 was a landmark year for India’s mutual fund industry, characterized by significant growth, increased retail participation, regulatory advancements, and technological innovations. The industry’s trajectory indicates a robust foundation for continued expansion and deeper financial inclusion in the coming years.
