Overview
The Indian asset management industry has witnessed remarkable growth over the past decade, driven by an increasing awareness of financial planning, a surge in retail participation, and robust economic expansion. This sector, which encompasses mutual funds,
portfolio management services, and alternative investment funds, has become a pivotal part of India’s financial landscape with a total AUM of ~₹117 or $1.3 trillion. With the asset management industry growing 6x in the last decade, the outlook also looks positive
with growth in mutual fund expected at CAGR of 14%, portfolio management services and alternative investment funds at CAGR of 26% till 2028. In the last decade (from FY14 to FY25), the PMS and AIF markets have been growing at a rate of 33% per year. As India
aspires to have $35 trillion economy size by 2047 and enters its next phase of rapid development, PMSes and AIFs are increasingly becoming the vehicle of choice for HNIs and UHNIs, seeking more personalized and higher-yielding investment options. This point
of view explores the emerging trends and growth trajectory of the asset management industry with a specific focus on mutual funds.
Key trends in mutual funds
- Increasing Investor Participation
The India Mutual Fund Industry is expected to reach USD 0.78 trillion in 2025 and grow at a CAGR of greater than 18% to reach USD 1.78 trillion by 2030. Millennials and Gen Z are increasingly interested in mutual funds because they are more likely to embrace
technology and digital tools for investing. There is also an increased focus on expansion into smaller towns and rural areas by offering micro- investing which is as low as INR 500. Tier 2 and tier 3 cities now account for more than 35% of new SIP registrations,
demonstrating the widening geographic spread of Indian mutual funds. Women investors now represent approximately 33% of new mutual fund accounts, showing improved gender diversity in the Indian financial market.
- Technology and Fintech Integration
With tools like mobile apps, robo-advisors, and data analytics, investors can manage their portfolios in real time and track their investments with ease. The use of technology makes mutual funds more accessible to the average Indian investor, who can now
easily invest and track their portfolio from the comfort of their home. Partnerships between AMCs, fintech companies, and technology providers help in creating digital platforms that can offer a wide range of financial services in one place and build platforms
that offer superior customer service, including faster onboarding, online transaction capabilities, better customer grievance resolution, efficient and timely dashboards. At the same time, digital payment systems make it easier to transfer funds and complete
transactions. DSP Asset Managers has joined hands with Cybrilla to become one of the first mutual fund companies to go live on the Open Network for Digital Commerce (ONDC). The Network’s open design lets more distributors, including local entrepreneurs and
fintech startups—offer mutual funds to a wider audience. Because ONDC Network is decentralized, DSP and its partners can create new investment products like daily SIPs or goal-based micro-investments.
- Thematic investments on the rise
Newer thematic funds have adopted increasingly focused, narrow ideas. From housing, defense and manufacturing, NFOs have moved on to target themes like tourism, electric vehicles, rural opportunities, conglomerates, among other flavours. Among the latest
offerings, funds are targeting ideas like Railway PSUs and premium consumption. . In India, the ESG theme is also gaining popularity, and a few fund houses have launched ESG-thematic funds.
India’s passive mutual fund AUM surged 21% YoY to ₹11.13 lakh crore in March 2025, with equity ETFs and index funds dominating the landscape. Passive funds now account for 16.7% of the overall mutual fund industry AUM, reflecting a growing shift towards
index-linked strategies. The growth in passive AUM over the past year underlines a shift in investor preference towards low-cost, rule-based investment vehicles. While equity ETFs and index funds dominate the landscape, the performance of debt and commodity
passive funds presents a nuanced picture of evolving investor sentiment and market conditions. Recently Jio BlackRock has received approval from India’s markets regulator to launch five passive index funds.
Key drivers for growth
- Increased investor awareness and financial literacy
Financial literacy initiatives and campaigns by industry bodies like AMFI (Sahi hai, Bharat Nivesh Yatra etc) are playing a crucial role in educating investors about the benefits of mutual funds which is a significant factor for choosing mutual funds as
an investment option among retail investors.
Online platforms and mobile apps (Zerodha and Groww (1+ crore total users) have simplified the investment process, making it more convenient for retail investors, especially the younger generation. These platforms simplify investment journeys with features
such as goal-based investing, real-time portfolio tracking and personalized recommendations, empowering investors to make informed and independent decisions.
- Shifting preferences from traditional savings
Declining interest rates on traditional savings instruments like fixed deposits have encouraged investors to explore higher-yielding options like stock markets. India’s total demat account is expected to cross 18 crores by Nov 2024 – growing by over 4 crores
in 2024 alone. NSE recorded the highest number of initial public offerings (IPOs) in Asia for the calendar year 2024 (CY24), with a total of 268 listings across its mainboard and SME platform. The trend is expected to continue in 2025; will enhance investor
options.
- Expansion into new asset classes
SEBI has permitted investments in new asset classes like REITs, InVITs, Gold and silver ETFs, expanding the investment options available to mutual funds. Alternative assets market in India is expected to grow 5X to USD 2 Tn by 2034. Alternative investments
outperform traditional investment options, offering higher alpha, attracting increased interest from India’s HNI and UHNI segments
- . Regulatory push for transparency and lower costs
SEBI has been instrumental in promoting transparency and lower costs in the mutual fund industry. Some of the regulations include the recent Mutual Fund Lite Regulations (2024) to bring compliance, new regulations seeking a clear segregation of offshore
derivative instruments (ODIs) and foreign portfolio investors (FPIs) and mandated more disclosures to reduce systemic risks in India’s capital market relaxations for the passively managed schemes.
Key challenges for fund houses
- Lack of penetration in rural areas
Low financial literacy in Tier-2 and Tier-3 cities and a preference for traditional, more straightforward and perceived-safer options, such as fixed deposits, PPFs, and gold, hindered broader adoption. Similar challenges exist in the rural areas with the
added factor of linguistic hindrances and lack of digital knowledge limiting the usage of digital platforms. There is more focus on the B-30 cities to attract investments, which has resulted in growth up to 40% in those cities.
- Market volatility and investment costs
Severe market corrections and inherent volatility of equity markets have been major deterrents for casual retail investors from investing in mutual funds due to uncertain market returns. High investment costs in terms of total expense ratios due to exit
loads, management fees and commissions are also additional challenges. Stable alternatives like public provident fund (PPF) also reduced the investments. HDFC Mutual Fund recently announced a hike in the Total Expense Ratio (TER) for its Mid-Cap Opportunities
Fund from 0.67% to 0.73%.
Despite increasing awareness mutual funds has limited set of AMFI distributors concentrated mainly in metropolitan areas. This has led to smaller investors and rural investors to take a cautious approach due to lack of advisory support and lack of confidence
in investing independently in equity linked investments. Apart from the regular banks, another intriguing development is the inclusion of 18 boutique Mutual Fund Distributor (MFD) firms in the list of top 100. These boutique MFD firms are notably supported
by individual MFDs, indicating a growing presence of niche, independent players.
- Operational and cost challenges
Although the mutual fund industry has made considerable progress in standardizing processes, a few challenges persist. These include simplifying the KYC procedures to ensure hassle-free onboarding, allowing Aadhaar to be used interchangeably with PAN, and
enabling investments based on “Bank KYC”. The data localization requirements and cost sensitivity of Indian markets also hurt foreign fund houses. Only six of the Top 20 Asset Management companies in India are foreign owned fund houses. Among these,
Invesco formed a joint venture with IndusInd International Holdings Limited (IIHL) by selling off 60% stake in 2024 and notable is the Jio Blackrock joint venture.
The mutual fund companies are finding it difficult to expand into different businesses due to Clause 24 of the mutual fund regulation dealing with the issues pertaining to business activities that AMCs can take. The regulation mandates AMCs not to undertake
business activities that are in conflict of interest with the core business of managing mutual fund schemes. The Securities and Exchange Board of India (SEBI) is reviewing its mutual fund regulations, including the scheme categorization framework and restrictions
on asset management company (AMC) activities to simplify compliance and reduce regulatory burden.
The growth trajectory
At least six new fund houses have in-principle approval to set up the mutual fund business which includes big names like Jio Blackrock, Capital mind etc. While new entrants like Jio BlackRock plan to cater to all segments of the mutual
fund business — including active, passive, and smart-beta strategies — and offer products across equity, debt, and hybrid categories, others are adopting a more focused approach. Some of the fund houses plan to exclusively offer passive funds, meanwhile others
plan to concentrate on factor-based and quantitative investing strategies. Therefore, identifying the right theme is crucial for success.
To attract NRI/foreign investments or overseas investments from India, many foreign FIs have set up branches in GIFT City. DSP Mutual Fund’s Global equity fund is the first open ended mutual fund for retail investors under the GIFT city which allows Indian
residents to invest in a diversified portfolio of global equities.
US-based State Street Global Advisors (SSGA), the asset management division of State Street Corporation, has established a strategic relationship with small case, a provider of model portfolios and investment platforms in India’s capital markets. The collaboration
will enable SSGA to distribute its Standard & Poor’s Depositary Receipt (SPDR) ETFs through small case’s digital investment platform, opening up avenues for Indian investors to access global markets. Thus, foreign fund houses find it beneficial to partner
with Indian Financial Institutions (Fis) to launch Asset Management Products.
Anticipated advancements in fintech and AI will continue to reshape the mutual fund industry, offering innovative solutions for investors. Collaboration between AMCs, fintech startups, and technology providers will drive the expansion of integrated digital
platforms, providing holistic financial solutions. Moreover, the proliferation of digital payment systems and open banking initiatives will facilitate seamless fund transfers and transaction processing, further enhancing the efficiency and accessibility of
mutual fund services. Ensuring data privacy and protection is paramount, requiring continuous investment in cybersecurity measures and regulatory compliance initiatives.
RTAs (Registrar and Transfer Agents) are the operational backbone of the mutual fund industry. RTAs leverage automation, enabling AMCs to scale operations efficiently while ensuring error-free processing and reliable services. This has significantly reduced
operational costs and enhanced efficiency for AMCs, allowing them to cater to the market’s growing demands. RTAs also provide centralized digital platforms, offering investors real-time access to portfolios, transaction histories and account details, enhancing
transparency and convenience.
Women investors are increasingly making their mark in the mutual fund space, with their share of investments growing significantly over the past five years. According to the Association of Mutual Funds in India (AMFI), women now hold 33% of the total individual
investor assets under management (AUM) as of March 2024.
Conclusion
In summary, the growth trajectory remains strong with 6x increase measured by AUM over the last decade or so is attributed to the concerted efforts of all stakeholders of the ecosystem. AMCs developed innovative products and made them attractive for average
investors (SIPs, FoFs, ETFs, etc.); technological interventions such as digital-first platforms by new-age players and digital tools and infrastructure were established by RTAs to streamline onboarding, settlement, record-keeping and servicing; campaigns were
created to drive customer awareness and distribution reach by AMFI (MF Sahi Hai, MFD Shuru Karein); and regulatory interventions were imposed around product simplicity, affordability, democratization and sustainability.
