Retail participation in India’s financial markets is expected to expand further as increasing financial awareness, digital investment access and regulatory reforms encourage households to allocate a larger share of their savings to market-linked financial products, according to the Securities and Exchange Board of India (SEBI) Annual Report 2025-26.
SEBI highlighted the continued growth of mutual funds, systematic investment plans (SIPs) and other professionally managed investment products as indicators of the changing investment preferences of Indian households. The regulator noted that financial assets are gaining greater prominence compared with traditional savings instruments.
The mutual fund industry has been a major contributor to this shift. Total assets under management (AUM) increased from Rs 31.43 lakh crore in March 2021 to Rs 73.7 lakh crore in March 2026, representing more than a two-fold rise over five years.
The number of unique mutual fund investors grew 13.2 per cent year-on-year to 6.1 crore during 2025-26. Investor participation is also spreading beyond major metropolitan centres, with Tier III cities accounting for 55 per cent of the investor base, reflecting wider adoption of investment products across smaller cities and towns.
SIPs continued to gain importance as a long-term investment route. SIP accounts increased to 1,045 lakh in 2025-26 from 1,005 lakh in the previous year, while assets accumulated through SIPs rose from Rs 13.35 lakh crore to Rs 15.1 lakh crore. Gross SIP contributions increased 20.8 per cent to Rs 3.5 lakh crore, while net inflows reached Rs 1.97 lakh crore.
The overall mutual fund industry recorded 12.2 per cent growth in AUM during the year. Equity-oriented schemes received net inflows of Rs 3.5 lakh crore, while passive investment products also witnessed stronger demand. Net inflows into passive schemes increased to Rs 2.1 lakh crore, compared with Rs 1.4 lakh crore in 2024-25.
SEBI has simultaneously emphasised the importance of strengthening safeguards as retail participation expands. Stress tests conducted for large small-cap schemes indicated that portfolios could take significantly longer to liquidate during periods of elevated redemption pressure, underlining potential liquidity and concentration risks.
The regulator is also pursuing measures to simplify the mutual fund regulatory framework while maintaining standards relating to investor protection, transparency and governance.
Overall, SEBI's assessment indicates that digital accessibility, improving investor awareness, SIP adoption and regulatory reforms are likely to remain key drivers of retail participation, supporting the continued transition of Indian household savings towards professionally managed and market-linked financial assets. CASansaar