Capital market participation by Indian households is undergoing a structural shift, with mutual funds (MFs) and equities nearly doubling their share of domestic financial savings in a single year, according to Bajaj Mutual Fund’s latest market symposium.
MFs and equities accounted for 15 per cent of household financial savings in 2024-25 (FY25), up from 9 per cent in FY24 and 8 per cent in FY19.
Meanwhile, currency and bank deposits fell to 41 per cent of household financial savings in FY25, from 43 per cent in FY24 and 48 per cent in FY19. Share of MF assets as a proportion of bank deposits rose from 16 per cent in 2020 to 31 per cent in 2025.
Yet rising allocations have not translated into proportionate investor gains, showed Morningstar data cited by Bajaj MF. Over a three-year period, funds returned 10.47 per cent against 7.79 per cent of investor gains. Over a five-year period, the returns were 8.79 per cent compared with 6.25 per cent investor gains.
The gap has widened over a decade, with 12.33 per cent returns for funds against just 6.54 per cent gains for investors. This suggests that a longer horizon has not mitigated the impact of challenging market conditions.
The divergence peaks in sectoral bets: Technology funds delivered 27.49 per cent over a three-year period, but investors captured only 2.71 per cent gains. However, the gap was narrower in flexi-cap funds (11.15 per cent returns against 8.05 per cent gains) and multi-cap funds (12.02 per cent returns as opposed to 8.58 per cent gains).
Direct channels now account for 45 per cent of MF investments, while India’s AUM-to-GDP ratio of 21.1 per cent still trails emerging market peers such as Brazil and South Africa. Here AUM denotes assets under management.
