Are mutual funds becoming India’s default savings engine? SEBI data shows this

India’s understanding of household savings may have been significantly underestimated until now. A revised methodology developed by SEBI in consultation with the Reserve Bank of India (RBI) and the Ministry of Statistics and Programme Implementation (MoSPI) has revealed a much larger picture of how households invest through India’s securities markets, highlighting a major shift toward mutual funds and broader financial assets.

Household securities investments

The report showed that household savings through securities markets rose sharply to ₹6.91 lakh crore in FY2024-25, compared with ₹3.58 lakh crore in FY2023-24 and ₹2.59 lakh crore in FY2022-23.

The findings suggest that Indian households are increasingly channeling savings through formal financial products rather than relying solely on traditional assets like gold and real estate.

However, one of the most notable findings was not the increase in total flows but a significant shift within household investing patterns.

Direct equities, mutual funds

Jimeet Modi, founder and chief executive officer of Samco Group, pointed to what he described as the report’s most revealing trend.

“The most interesting number in this report isn’t the headline. It is the fact that households were net SELLERS of direct equity to the tune of ₹54,786 crore in FY25 — and ₹69,329 crore the year before — even as they were record buyers of mutual funds,” he said.

According to Modi, this does not indicate investors moving away from equities.

“This is not retreat. This is maturation. The Indian retail investor is booking gains on direct stockholdings and outsourcing fresh allocation to professional vehicles.”

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He added that Indian markets may now be witnessing a structural shift from speculative participation toward more disciplined investing.

“At least in the equity cash markets, we are watching the structural shift from a punter market to an investor market unfold in real time, on a national balance sheet,” Modi said.

Mutual funds

Mutual funds emerged as the biggest beneficiary of changing household preferences.

“MFs have become the primary plumbing,” Modi said.

Of the ₹6.91 lakh crore invested by households through securities markets in FY25, nearly four-fifths came through mutual funds, according to his interpretation of the data.

Primary mutual fund flows alone surged from ₹1.66 lakh crore in FY23 to ₹5.13 lakh crore in FY25, underscoring the rising role of systematic investing.

“SIPs are now the operating system of India’s household financial savings,” Modi said.

The findings indicate that India’s household savings story may increasingly be shifting from physical assets and direct stock picking toward professionally managed, long-term financial products.

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Updated Sebi rules

The updated approach, which incorporates actual granular data instead of broad estimates, has materially changed the national savings picture. According to the study, the revised framework resulted in a 47 basis point increase in the Gross Savings-to-GDP ratio for FY2024-25, taking it to 34.94% from 34.47% under the earlier methodology.

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Earlier estimates relied on assumptions, including attributing 35% of equity public and rights issues and 40% of corporate debt issuances to households, while many investment channels remained excluded. Investments in secondary markets, preferential equity issuances, REITs, InvITs, private debt placements and several newer instruments were not fully captured.

The revised framework now includes secondary market investments, REITs, InvITs, Alternative Investment Funds (AIFs), private debt placements and Non-Profit Institutions Serving Households (NPISHs), offering a more comprehensive view of financial savings behavior.