Mutual Fund Industry in India: Siz, Trends & Future Outlook

In India, mutual funds have gradually become a part of people’s everyday investment habits. Investing is no longer limited to large investors; even ordinary people are now participating in the market through SIPs (Systematic Investment Plans). The industry has grown rapidly, and along with it, investors’ mindsets have also changed. In this blog, we will understand the current state of the mutual fund industry and its future prospects in simple terms.

Current Size of the Mutual Fund Industry in India

Today, India’s mutual fund industry has become a strong pillar of the country’s financial system. By the end of December 2025, the industry’s total Assets Under Management (AUM) had exceeded ₹80 lakh crore, demonstrating the continuously growing confidence of investors. 

AUM represents the total amount of money that mutual fund companies manage on behalf of investors across various schemes. Average AUM (AAUM), on the other hand, reflects the average assets under management over the entire month, providing insight into the stability of investment flows. The mutual fund industry has witnessed exceptional growth over the past ten years. While the total AUM was approximately ₹20 lakh crore in 2015, it has more than quadruple by 2025. 

This rapid growth is primarily driven by the increasing popularity of SIP (Systematic Investment Plan) investments, easy access through digital platforms, and growing financial awareness among investors. Today, mutual funds are no longer limited to large investors; small and medium-sized investors are also participating regularly, further strengthening the industry’s foundation.

Year	Total AUM (₹ lakh crore)
2015	20.00 +
2020	30.00 +
2025	80.00 +

Category-wise Distribution of Mutual Fund Assets

Investment categories in the mutual fund industry

1. Equity Mutual Funds: Equity funds have become the largest segment of the mutual fund industry. Investors prefer them because of the potential for better returns from the stock market over the long term. Funds like Flexi-cap and multi-cap are seeing particular interest, as they can adjust their portfolios according to market conditions.
2. Debt Mutual Funds: Debt funds are suitable for investors who want to minimize risk and expect regular income. Because they invest in government and corporate bonds, they are also seen as an alternative to fixed deposits (FDs). Changes in interest rates directly impact these funds.
3. Hybrid Mutual Funds: Hybrid funds invest in both equity and debt. Their objective is to strike a balance between risk and return. They are considered a practical option for new investors and those with a moderate risk appetite.
4. Passive Funds and ETFs: Passive funds and ETFs have grown rapidly in popularity over the past few years. These funds have lower costs and track a specific index. Investors who want market-like returns at a lower cost are increasingly choosing them.
5. Gold and Commodity Funds: Gold and commodity-based funds are for investors who want to hedge against market uncertainty. Demand for these funds increases during times of inflation and global tension, as they are considered safe-haven investments.

Shifting Investor Preferences

1. Shift towards Equity and Passive Investing: Investors are now focusing not just on safe options, but on long-term wealth creation. This is why the share of equity and passive funds is increasing.
2. SIPs Connect with the Average Investor: SIPs (Systematic Investment Plans) have made investing easy and regular. It has become the most trusted method for investors in smaller cities and for new investors.
3. Focus on Cost and Transparency: Today, investors make decisions after understanding the expense ratio, fund strategy, and risk level. This is why low-cost and transparent products are being chosen more often.

Growth Drivers of Mutual Funds in India

1. Growing habit of SIP investments: SIPs have made investing easy and regular. People are able to invest small amounts every month, leading to a continuous increase in the number of investors over the long term.
2. Digital platforms and mobile apps: Online apps and websites have made buying mutual funds very simple. Now investors can invest directly from their mobile phones without needing an agent.
3. Improved financial literacy: Campaigns by AMFI and SEBI are providing people with accurate information about investing. People are now considering mutual funds as a serious investment option alongside fixed deposits.
4. Growing middle class and income: The increasing size of the middle class in the country has led to a rise in the number of investors. With higher incomes, people are focusing on both saving and investing.
5. Participation of young investors: The younger generation is now starting to invest early. Due to their longer life expectancy and future planning, they are using mutual funds as a means of wealth creation.

Recent Performance and Industry Momentum

1. AUM Growth Trends in Recent Years: The AUM of the mutual fund industry has grown consistently over the past few years, but the pace of growth has not been as rapid as before. The main reasons for this are fluctuations in the stock market and high valuations. When the market is strong, AUM grows rapidly, and when the market is weak, the growth slows down. Despite this, the industry’s total size remains at record levels.
2. The Difference Between Net Inflows and Market Returns: There are two reasons for AUM growth one is new money (Net Inflows) and the other is returns from the market (Market Appreciation). Even when the market falls, the regular investments through SIPs help stabilize the industry. This is why the mutual fund industry doesn’t completely collapse even during periods of volatility.
3. Stability of SIP Investments: In recent times, there has not been a significant decline in SIP inflows. This means that investors are now more likely to maintain their investments for the long term rather than panicking and stopping their investments.

Rise of Passive Funds and ETFs in India

1. Growing Understanding of Index-Based Investing: Investors now want funds that track the market directly. This is why index funds and ETFs are becoming increasingly popular as simple and reliable investment options.
2. Cost-Conscious Investors: People are becoming more aware of expense ratios. Funds with lower fees offer greater returns in the long run, leading to increased demand for passive funds.
3. Performance Pressure on Active Funds: The popularity of passive funds is putting pressure on active fund managers to deliver better results. Fund selection is now based on performance rather than just brand name.
4. Increasing Number of New ETFs: The market is seeing a growing number of new ETFs based on various sectors and indices. This makes it easier for investors to choose options that suit their specific needs.
5. Easy Diversification Method: An ETF allows investment in multiple companies through a single instrument. This diversifies risk and helps maintain a balanced portfolio.

Distribution Channels and Technology 

1. The Role of Direct Plans and Regular Plans: Today, investors buy mutual funds through two routes – Direct Plans and Regular Plans. Investors who prefer to do their own research choose Direct Plans, while those seeking guidance opt for Regular Plans and the assistance of advisors.
2. Digital Platforms and Mobile Apps: Mobile apps and online platforms have made investing incredibly easy. The entire process, from opening an account to making investments, can now be completed in just a few minutes.
3. Financial Advisors and the Hybrid Model: Many investors are now adopting a hybrid model, rather than relying solely on digital platforms or financial advisors. This model combines the benefits of technology with personalized human advice.
4. Automation and Portfolio Monitoring: Features such as Auto SIP, auto-rebalancing, and portfolio tracking have made it easier for investors to monitor their investments continuously and make more informed decisions.

Regulatory Support and Industry Framework

1. SEBI’s Role: SEBI has played a crucial role in making the mutual fund industry organized and secure. Regulations mandating clear disclosure of fund information, expenses (expense ratio), and risks help investors make informed decisions. This fosters trust in the industry.
2. AMFI’s Contribution: Investor Education: AMFI has launched several campaigns to educate investors, such as “Mutual Funds Sahi Hai” (Mutual Funds are Right). These efforts have helped people understand the benefits, risks, and proper ways to invest in mutual funds.
3. Impact of Regulations: Trust and Stability: New regulations and improved oversight have increased the industry’s credibility. Investors now have the confidence that their money is being invested within a safe and regulated system.

Challenges and Risks Facing the Industry

1. Market Volatility: When the stock market fluctuates, it impacts the returns of mutual funds. During market downturns, many investors panic and stop investing.
2. Impact of Interest Rates: Changes in interest rates affect the value of debt funds. Sudden changes can lead to losses for investors.
3. Over-concentration in Sector Funds: Some investors invest heavily in funds of a single sector. This reduces diversification and increases risk.
4. Lack of Patience During Market Downturns: Many investors stop their SIPs (Systematic Investment Plans) when the market falls, disrupting their long-term investment plans.
5. Challenges in Distribution and Advice: The pressure to keep costs low makes it difficult to provide sound advice and deliver information effectively to investors.

Conclusion 

The landscape of mutual funds in India has changed significantly in recent years. Today, investing is no longer limited to large cities or wealthy investors. SIPs (Systematic Investment Plans) and online platforms have connected ordinary people to the market. In the future, this increased participation will become the true strength of the industry and make investing even more accessible.

As the mutual fund industry continues to grow, investors can access ETFs, mutual funds, and Asset Management Companies (AMCs) through Pocketful, offering zero brokerage on delivery and mutual funds via a seamless, easy-to-use platform.

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