The expansion reflected sustained domestic participation rather than market-led gains, pointing to a structural shift in investor behaviour.
“2025 was a tough year to make money, but investors stayed invested,” said Prashant Shah, Co-founder and CEO, Definedge Securities. “The growth came less from returns and more from discipline and better allocation choices.”
SIPs anchor flows amid volatility
Monthly systematic investment plan (SIP) inflows hovered around ₹29,000 crore, with October marking an all-time high. Equity mutual funds also recorded their 57th consecutive month of net inflows, even during periods of market corrections.
Market participants noted a departure from earlier cycles, when volatility often triggered retail redemptions.
“The correlation between market swings and panic selling broke in 2025,” said Aditya Mulki, CEO, Navi AMC. “Despite sustained foreign outflows, SIP inflows remained resilient, showing that retail investors acted as accumulators, not exit-driven traders.”
“Despite market volatility, investors continued to stay invested,” said Deepak Jain, President & Sales – Head, Edelweiss Mutual Fund. “SIP discipline held up well and continued to anchor long-term participation.”
According to Mulki, SIP contributions to total inflows at Navi nearly doubled over the year. Manish Gadhvi, CEO, FundsIndia Partner, added that this consistency reflected growing investor maturity. “Investors stayed committed even during corrections, which reinforces confidence in long-term investing and industry stability,” he said.
Selectivity rises; diversification regains focus
Equity inflows remained broad-based across large-, mid- and small-cap categories, with flexi-cap funds emerging as a key beneficiary, reflecting investor preference for manager flexibility amid valuation dispersion.
Investors moderated exposure to sectoral and thematic funds, which had attracted heavy inflows in 2024.
“Investors are moving back to diversified equity categories and away from concentrated sector bets,” said Kaustubh Belapurkar, Director – Fund Research, Morningstar. “Flows into thematic funds were far more measured in 2025.”
“Investors are becoming more selective rather than exiting risk altogether,” Jain said, pointing to a more balanced approach to equity allocation.
Hybrid and multi-asset funds also gained traction as investors consciously balanced risk. Industry data show hybrid fund inflows accelerating sharply in the latter part of the year.
“There is greater awareness of asset allocation and portfolio balance,” said Gadhvi. “This reflects a clear shift from trend-chasing to building resilient portfolios.”
Passive funds and commodities gain share
Passive investing continued to expand, with index funds and ETFs accounting for nearly 18-19% of industry AUM. Cost efficiency and consistent performance, particularly in large-cap exposure, supported the trend.
Mulki described investor behaviour as “barbell-oriented”, combining passive core holdings with selective active exposure.
Commodity-linked funds, particularly gold and silver ETFs, also saw renewed interest during global uncertainty. Belapurkar noted that rising allocations to gold and multi-asset strategies signalled growing comfort with cross-asset diversification among retail investors.
Fund launches reflect demand for choice and precision
Fund houses continued to expand offerings despite a volatile backdrop. About 245 new mutual fund schemes were launched in FY2025, collectively mobilising over ₹1.08 lakh crore.
The pipeline included a mix of diversified, passive, hybrid and sectoral funds, reflecting demand for both core portfolio building blocks and targeted exposure.
The year also saw new entrants and strategic launches.
Jio BlackRock rolled out multiple schemes with a digital-first approach, Angel One Mutual Fund entered with a passive-only strategy, while boutique managers such as Unifi Capital and Helios focused on high-conviction niche products.
Market participants said the diversity of launches mirrored evolving investor preferences — selective risk-taking alongside core, cost-efficient allocations.
Non-metro participation deepens
Growth came from beyond major metros. Cities outside the top 30 now contribute roughly 19-35% of industry AUM, compared with higher concentration a decade ago.
The total number of mutual fund folios rose to around 250 million, driven by first-time investors entering through SIPs, particularly from smaller towns.
“First-time investors from non-metro cities are starting their journey with discipline rather than speculation,” said Gadhvi. “That is a meaningful structural change.”
Edelweiss MF added around 60 lakh net new investors year-to-date, marking growth of over 12%.
“First-time investors are starting their journey with SIPs rather than speculative lump-sum bets,” Jain said, noting that retail participation from non-metro cities played a key role in expanding the SIP book.
Digital onboarding and app-based platforms played a key role in expanding reach, with several fund houses reporting faster B30 asset growth than metro averages.
Outlook 2026: allocation over aggression
Market participants expect investor focus to remain on balanced allocation rather than aggressive risk-taking. Mid- and small-cap valuations remain elevated, which could redirect flows toward hybrid, value-oriented and quality-focused strategies.
Interest rate trends will shape debt fund performance, while equity returns will increasingly depend on earnings growth aligning with valuations.
“Domestic flows have become a stabilising counterweight to volatile foreign flows,” said Belapurkar. “But valuations, earnings visibility and global risks will remain key watch points.”
Shah summed up the year’s takeaway: “2025 clearly showed that Indian investors have matured. India is steadily becoming a nation of investors rather than just savers — and that behavioural shift is likely to define the industry’s trajectory into 2026.”
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