Where Is India Investing? Mutual Fund Trend Analysis 2025-26
India’s mutual fund industry has crossed a historic milestone in 2025–26. With ₹81+ lakh crore in AUM, record SIP inflows above ₹3 lakh crore annually, rising retail participation, and strong sector shifts, investors are allocating money more strategically than ever before.
Mutual Fund AUM Crosses ₹81 Lakh Crore
The industry has grown rapidly over the past decade.
AUM Growth Snapshot
| Period | Total AUM (₹ lakh crore) |
|---|---|
| 2015 | ~12 |
| Mar 2025 | 65.74 |
| May 2025 | ~72 |
| Oct 2025 | ~79.88 |
| Jan 2026 | 81.01 |
The industry has grown more than 6× in 10 years.
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What’s driving this growth?
- Consistent SIP inflows
- Expanding retail participation
- Strong equity market performance
- Wider digital access to investing
This is no longer a metro-only story. Tier-2 and Tier-3 cities are contributing meaningfully to new folios.
SIP Inflows Hit Record Highs
Systematic Investment Plans (SIPs) remain the backbone of India’s mutual fund ecosystem.
SIP Trends (2025 Data)
- Total SIP inflows (2025): ~₹3.03 lakh crore
- Average monthly SIP inflow: ~₹29,000–30,000 crore
- Active SIP accounts: ~9.25 crore
- SIP AUM share: ~20% of total industry assets
This means nearly one-fifth of total industry assets now come from systematic monthly investing.
Why SIPs continue to dominate:
- Market volatility has increased
- Investors prefer disciplined investing
- Young earners are entering early
- Cost averaging reduces timing risk
SIPs are no longer just a beginner strategy – they’re a long-term wealth engine.
Equity Funds Remain the Core Allocation
Despite corrections in mid and small caps during parts of 2025, equity funds continue to attract steady inflows.
Large-Cap Funds: Stability Anchor
- Lower volatility
- Strong institutional holdings
- Ideal for core portfolio allocation
Mid-Cap Funds: High Growth, Selective Allocation
Recent data shows mid-cap SIP returns near 19–20% annualised in some leading schemes over multi-year periods, compared to ~17% for large caps.
However, inflows have become more selective due to valuation concerns.
Trend Insight
Investors are shifting from “chasing momentum” to:
- Quality businesses
- Earnings visibility
- Risk-adjusted returns
Sector Allocation: Where Money Is Moving
2025–26 shows clear sector positioning trends.
PSU Banks & Financials
- Mutual funds increased exposure to PSU banks
- Allocation hit a 3-year high (~3.7% weight in Jan 2026)
This reflects confidence in:
- Credit growth
- Improving balance sheets
- Government-led capex cycle
Capital Goods & Infrastructure
Fund managers are allocating more to:
- Infrastructure
- Manufacturing
- Capital goods
This aligns with India’s long-term growth and public investment push.
IT Sector: Selective Interest
Some institutional investors have reduced exposure due to:
- Global demand concerns
- Margin pressure
However, long-term structural growth remains intact.
Gold ETFs Gaining Popularity
Gold exposure is increasing as a hedge.
One major Indian gold ETF attracted $900M+ in inflows, ranking among the top globally.
This signals:
- Portfolio diversification
- Geopolitical risk hedging
- Tactical asset allocation
Cash Allocation & Risk Positioning
Mutual funds reduced overall cash holdings to around ₹2.05 lakh crore, though cash as a percentage of AUM remains close to ~4.8–5%.
This suggests:
- Funds are largely deployed
- Managers see selective opportunities
- Liquidity buffers remain intact
Passive Investing Is Expanding Rapidly
Index funds and ETFs are among the fastest-growing categories.
Reasons include:
- Lower expense ratios
- Transparency
- Simpler asset allocation
Many investors now use a core + satellite approach:
- Core: Index funds
- Satellite: Active mid-cap, sector, or thematic funds
This shows increasing sophistication in portfolio construction.
Investor Behavior Is Maturing
The biggest change in 2025–26 is behavioral.
Investors are:
- Less reactive to short-term volatility
- More focused on long-term asset allocation
- More diversified across categories
- Increasingly data-driven
India’s mutual fund ecosystem is becoming structurally stronger.
Key Trends at a Glance
| Trend | Current Status |
|---|---|
| Total AUM | ₹81+ lakh crore |
| Annual SIP Inflows | ₹3+ lakh crore |
| Active SIP Accounts | 9+ crore |
| Equity Allocation | Dominant |
| PSU Bank Exposure | 3-year high |
| Gold ETF Inflows | Strong |
| Passive Funds | Fast growing |
What Should Investors Do in 2026?
If you’re investing now:
- Keep SIPs running consistently
- Maintain a strong core allocation (large-cap/index funds)
- Add mid-caps selectively
- Avoid overexposure to single sectors
- Include some debt or gold for stability
- Rebalance annually
Market cycles will change. Asset allocation discipline matters more than timing.
FAQs: India Mutual Fund Trends 2025-26
Q. Is SIP still effective in 2026?
Yes. Record inflows show strong investor confidence and disciplined participation.
Q. Are mid-cap funds risky now?
They carry higher volatility but remain attractive for long-term investors with high risk tolerance.
Q. Is gold a good addition?
Gold ETFs are being used as a hedge and diversification tool.
Q. Should I shift fully to passive funds?
Not necessarily. A balanced mix of active and passive can optimize returns and costs.
Final Takeaway
India’s mutual fund industry in 2025–26 is not just growing – it is maturing. With ₹81 lakh crore in AUM, record SIP inflows, stronger sector positioning, rising gold allocation, and expanding passive adoption, investors are thinking more strategically. The real shift isn’t just where money is going – it’s how intelligently it’s being allocated. If these trends continue, India’s mutual fund ecosystem could cross ₹100 lakh crore in the coming years.
Disclaimer
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