Is Direct Equity Out? Sebi Report Shows Retail Money Flowing Into Mutual Funds

The word ‘savings’ has traditionally connoted fixed deposits in banks or physical assets like land or gold in India. However, with the rise of digital broking and the rising adoption of technology the definition has shifted toward capital market instruments.

A research paper titled ‘Household Savings through Indian Securities Market’ by the Securities Exchange Board of India has shown how the financialisation of household savings is happening at a rapid pace. Sebi mentioned in its study that the volume of household savings directed into the domestic securities market reached a record Rs 6,90,963 crore during the financial year 2024-2025.

Apart from greater digital access, the study also found that there’s an increasing appetite for wealth creation which is driving more and more households into investing in the capital market. Modern Indian households are attempting to get better returns for their money and greater financial liquidity. 

Household Wealth Expands To Rs 1.41 Lakh Crore

Sebi mentioned in its study that for this study it has altered its methodology to include all kinds of assets from shares to alternative assets held by individual savers and family trusts, charitable or non-profit institutions. To get a more realistic picture of household investing in India.The study showed that by the end of FY25, the total stock of wealth in the securities market owned by households stood at Rs 1,41,33,915 crore.

According to the study, direct equity investments formed the largest chunk of this wealth as India’s households own stocks worth Rs 88,91,532 crore. The second biggest chunk of this wealth is made up of household Mutual fund holdings worth Rs 44,39,413 crore.

Apart from stocks and mutual funds, newer alternative instruments are also gaining popularity among households as Alternative Investment Funds hold Rs 1,55,496 crore, while Infrastructure Investment Trusts accounted for Rs 12,643 crore and Real Estate Investment Trusts held Rs 11,441 crore. Notably, AIFs have witnessed strong growth in the last three fiscal years as investments in AIFs surged from just Rs 63 crore in FY23 and Rs 1,33,569 crore in FY24.

Retail investors have collectively built a massive financial safety net, making the household sector one of the biggest drivers of wealth accumulation in the economy.

Investors Dump Direct Investing For Mutual Funds

As India moves from fixed deposits towards the capital markets, the study showed that the shift is being led by mutual funds. In FY25 individual savers invested a huge part of their wealth into mutual funds, which grew to Rs 5,12,765 crore led by the growing preference for Systematic Investment Plans (SIPs). On the other hand, direct investments in the stock market through the direct buying of shares witnessed a negative flow of Rs 54,786 crore in FY25.

Notably, the trend for direct investing remained negative for the second consecutive fiscal after FY24 wherein the negative flows stood at Rs 69,329 crore. The back to back flows indicate that retail investors are choosing to not speculate on stocks and are increasingly preferring professional asset management for their equity holdings.

What This Means For Investors

For the average investor, the move from FDs and gold to the capital market hints at a collective confidence in the potential of India's booming corporate sector. The data shows that investors are diversifying their savings beyond the safety net of real estate and gold by adding relatively more liquid assets. The shift points towards a graduation from passive savers into active stakeholders in the national growth narrative for India’s retail investors.