Households Maintain Equity Investment Through Mutual Funds Despite Direct Market Slowdown
While direct participation by individual investors in the equity market has moderated following record inflows in 2024, Indian households have persisted in channeling their savings into equities via mutual funds. This trend underscores sustained confidence in equities as a viable long-term wealth creation avenue, according to a comprehensive report released by the National Stock Exchange (NSE).
Shift in Direct Investment Patterns
The report highlighted that after witnessing net investments of Rs 1.7 lakh crore (approximately USD 19.8 billion) in 2024 and consistent buying over the preceding five years, individual investors transitioned to moderate net sellers in 2025. During this period, net outflows from individual investors amounted to Rs 5,717 crore (around USD 0.6 billion).
Despite this moderation, cumulative net investments by individuals in NSE's secondary market over the past six years remained robust at Rs 4.5 lakh crore. This indicates a structural shift toward market-based savings among Indian households.
Preference for Indirect Equity Exposure
According to the NSE report, households have continued to favor indirect equity exposure through mutual funds even as direct equity buying has decelerated. This behavior reflects growing maturity among investors and a steadfast belief in equities as a long-term asset class for wealth accumulation.
The report also emphasized the structural importance of ownership and household wealth effects. Data from the report reveals that individuals, both directly and through mutual funds, held 18.75 percent of listed equities. This marks the highest share in over two decades, with the total value of individual holdings estimated at approximately Rs 84 lakh crore. This figure is more than five times the level recorded in March 2020.
Distribution of Household Equity Holdings
Nearly half of household equity exposure remains through direct shareholding, while the remaining portion is routed through mutual funds. Individuals account for about 84 percent of equity assets under management (AUM) in mutual funds, according to the report.
Wealth Creation and Market Dynamics
Despite interim volatility during the second quarter of FY26, cumulative household wealth creation since April 2020 was estimated at Rs 53 lakh crore. The report described this wealth accretion as a key mechanism linking capital markets to household balance sheets. Over time, this connection influences consumption patterns and bolsters investor confidence.
The report further noted that household equity wealth rebounded strongly in the first quarter of FY26 following a sharp sell-off in the latter half of FY25. However, during the September quarter, household wealth moderated again, partly offsetting earlier gains.
Even with this marginal decline, the report emphasized that cumulative household wealth creation since April 2020 remains substantial at roughly Rs 53 lakh crore. As of September 2025, the combined value of household equity exposure across direct ownership and mutual funds stood at approximately Rs 84 lakh crore. This reflects the growing role of capital markets in household savings and underscores the enduring appeal of equities as a wealth-building tool.
