Household investments in the Indian securities market have witnessed a significant shift, with mutual fund inflows reaching a record Rs 5.43 lakh crore in FY25. This surge, more than double the Rs 2.85 lakh crore recorded in FY24, highlights a growing preference for financial assets over traditional savings avenues.
Equity investments in the primary market also saw robust growth, with household flows through IPOs, FPOs, rights issues, and preferential allotments rising to Rs 95,139 crore in FY25, compared to Rs 46,879 crore in FY24. The domestic households' trust in mutual funds emerged as the biggest driver of these inflows.
Secondary market mutual fund flows, including ETFs, rose sharply to Rs 30,885 crore in FY25 from Rs 9,783 crore in the previous year. The combined flows into mutual funds and equities indicate a structural shift in household savings behavior.
The article by Dr. Prabhas Kumar Rath, Shyni Sunil, and Kalyani H highlights that household savings through the Indian securities market increased to a record Rs 6.91 lakh crore, nearly doubling from Rs 3.58 lakh crore in FY24. This shift is attributed to a revised methodology by Sebi, capturing a broader set of investments.
Household mutual fund holdings climbed to Rs 44.39 lakh crore at the end of FY25 from Rs 36.28 lakh crore a year earlier. Meanwhile, the value of household equity assets increased to Rs 88.92 lakh crore in FY25 from Rs 84.07 lakh crore in FY24.
The Sebi article emphasized that the revised methodology increased the household savings through securities markets-to-GDP ratio to 2.17% in FY25, compared with 1.71% under the earlier approach, indicating a previously underreported role of financial markets in wealth creation.
Background
The Indian securities market has seen a growing trend of household investments shifting from traditional avenues like gold and real estate to financial assets. This change is partly due to a revised methodology by Sebi that captures a broader range of investments, offering a more comprehensive view of household participation in capital markets.
As household savings continue to flow into the securities market, the trend suggests a growing confidence in financial markets as a vehicle for wealth creation. Observers will be keen to see if this momentum sustains in the coming fiscal year.
