Three key data points reveal where Indian households are investing their money.

The Story

Let’s take a moment to appreciate just how far the average Indian household has come in terms of building wealth and making smarter financial decisions.

Over the past decade, we’ve witnessed a massive shift in how we save, invest, and grow our money—and the numbers tell a fascinating story.

It’s no secret that Indian households have long preferred the safety of fixed deposits (FDs) and savings accounts. But things are changing, FDs & savings accounts are losing ground.

Exhibit 1:

The key highlights:

  • The combined share of FDs and savings accounts has gradually declined from 50% in 2019 to 39% in 2023.
  • Equities now hold 12% of household financial assets, nearly doubling their share since 2019!
  • The share of Mutual funds too, has seen an uptick from 8% to 11%, indicating a shift in investment preferences.

Households are seeking better returns, moving away from traditional products, and becoming more comfortable with the volatility of market-based investments.

Another indicator of changing preferences and favorable market conditions is the rise in Assets Under Management (AUM), the total assets managed by all mutual funds in India.

Exhibit 2:

The key highlight:

  • In FY15, the Average AUM stood at ₹11.9 trillion. By the end of August 2024, it is ₹66.04 trillion! That’s more than five times the growth in just over a decade.

This rise in AUM reflects the growing trust and confidence Indian households have placed in mutual funds, thanks to better financial awareness and easier access through digital platforms.

The result? Indian markets are no longer dependent on foreign money.

Exhibit 3:

The key highlight:

  • Mutual funds alone now own 9.17% of NSE-listed equities, up from about 4% a decade ago.

Foreign Institutional Investors (FIIs) may have dominated in the past, but today, Domestic Institutional Investors (DIIs), which include mutual funds, insurance, banks, etc. are catching up.

Despite constant selling from foreign investors for the last few years, Indian markets are hitting all-time highs.

To conclude:

From savers to investors, it truly has been a decade of transformation for Indian households.

Their growing participation is empowering domestic institutions, particularly mutual funds, to counterbalance foreign investor sell-offs and extend support to the equity markets.