Indian households are in the midst of a fundamental reordering of how they save and invest, with traditional bank deposits gradually giving way to market-linked instruments such as mutual funds and direct equities. According to Bain & Company’s How India Invests 2025 report, prepared using data from trading platform Groww, these two asset classes have emerged as the fastest-growing components of household portfolios over the past five years, outpacing the growth of conventional savings avenues.
The report projects that India’s mutual fund industry is on course for a dramatic expansion, with assets under management expected to exceed ₹300 lakh crore by FY2035. This growth is being underpinned not only by continued participation from existing investors but also by deeper household penetration, particularly in cities beyond the top 30 urban centres. These B30 cities — as classified by the Association of Mutual Funds of India — include fast-growing urban hubs such as Lucknow, Patna, Indore and Coimbatore, which are increasingly contributing to inflows.
Bain characterises this trend as a “structural transformation” in household wealth allocation. Indian savers are steadily reallocating capital away from deposits and cash towards instruments linked to capital markets. Mutual funds and equities, the report notes, are benefiting from a combination of rising financial literacy, sustained equity market performance, supportive regulation and the rapid spread of digital-first investment platforms that have lowered barriers to entry.
Despite the sharp rise in participation, India remains under-penetrated when compared with developed economies. Market-linked assets currently account for only about 15–20% of household investable wealth, far below the 50–60% levels seen in countries such as the United States and Canada. Bain argues that this gap is not a weakness but an indicator of significant headroom for future growth, particularly as awareness and comfort with financial products deepen.
Over the next decade, the report expects mutual fund AUM growth to be driven by both expanding household participation and rising per-household investment values. Digitally enabled mutual fund distributors, registered investment advisers and regulatory initiatives aimed at improving accessibility and transparency are expected to play a key role. Programmes focused on investor education and simplified onboarding have also helped draw first-time investors into the formal investment ecosystem.
Direct equity ownership is projected to follow a similar upward trajectory. Individual equity holdings, which stood at around ₹42 lakh crore by the end of FY25, are expected to approach ₹250 lakh crore over the next 10 years. Bain attributes this growth not only to rising penetration but also to a gradual shift in investor mindset — from short-term, speculative trading towards longer-term wealth creation.
The report highlights the influence of a digitally native investor base in accelerating this transition. Over the past five years, digital platforms have accounted for roughly 80% of direct equity investors and about 35% of mutual fund investors. There has also been a steady movement away from frequent trading in equities towards disciplined, long-term investing through systematic investment plans, reflecting greater maturity in retail behaviour.
Investor preferences vary across income and occupational segments. Salaried individuals tend to allocate a larger share of their savings to mutual funds through SIPs, while business owners and self-employed investors show a stronger inclination towards direct equity exposure. Demographic differences are also evident: younger investors, particularly from Gen Z, tend to react more sharply to market movements, whereas salaried Gen X investors typically display more stable and consistent investment patterns.
By the end of FY25, total household wealth in India was estimated at ₹1,300–1,400 lakh crore, representing a 13% increase over the past five years. Individual mutual fund assets alone reached approximately ₹41 lakh crore during this period, driven by a near doubling of household penetration from about 5–6% to 10–11%. Bain expects this momentum to continue, with penetration levels potentially approaching 20% over the next decade.
Growth in participation is expected to come from mass and mass-affluent households in major cities, as well as affluent and emerging middle-class segments in Tier-2 and smaller cities. Rising per-household investment values are likely to follow with a lag, mirroring patterns observed in mature markets such as the US and Canada, as investors hold assets for longer durations and increase allocations over time.
Direct equity participation has also been boosted by a sharp rise in dematerialised accounts, which have grown nearly five-fold in the last five years, aided by a strong post-pandemic IPO cycle. Easier access through app-based platforms, favourable demographics and improvements in digital public infrastructure have further accelerated this trend.
Bain concludes that sustained growth in both mutual funds and equities will depend on continued regulatory support, consistent market performance and a durable shift towards long-term investing. Together, these forces are steadily reshaping India’s household balance sheet — signalling a decisive move from traditional saving habits towards a more market-oriented investment culture.