Athira Sethu
Kochi, 27 Jan 2026
The growth in mutual fund assets and investor accounts witnessed a sharp decline in 2025, touching multi-year lows due to weaker returns from stock markets. Earlier, the mutual fund industry had enjoyed a few good years of expansion. A dull market and high base over previous years have finally taken their toll on the industry.
As per the latest data from the Association of Mutual Funds in India, the total AUM grew 20% in 2025, the slowest in the last three years. This was in sharp contrast to the 32% growth in 2024 and 27% seen in 2023. The mutual fund industry was managing all-time assets worth ₹ 80.2 lakh crore by the end of December 2025.
Investor participation also decelerated. The number of mutual fund folios, or investor accounts, increased 16% last year, the slowest in five years. This compared to growth between 17% and 37% since 2021. Total folios reached 26.1 crore at the end of the year.
Market performance played a significant role in this deceleration. Equity markets had quite subdued performance for most of 2025. Benchmark indices like the Nifty 50 returned some 10%, while mid-cap and small-cap stocks fared far weaker. With this, investor enthusiasm towards equity investments dulled.
Equity mutual funds, accounting for roughly 45% of total AUM, took the severest beating. Net equity AUM grew 17% to ₹35.7 lakh crore in 2025. This was a sharp fall from growth of 40% in 2024 and 43% in 2023. For many investors, equity returns became less attractive compared with other asset classes like gold, silver, and some overseas markets.
Debt mutual funds were moderately stable. Net AUM in debt funds grew 15% in 2025, lower than the 21% growth recorded in the previous year.
Inflows through SIP continued to rise and indicated that long-term investing habit remains strong. The total contribution of SIPs in the year 2025 stood at ₹3.3 lakh crore, up 24.6% from a year ago. However, this was slower than the sharp 45.7% growth it saw during 2024.
Experts say the slowing down was more pronounced among investors in metros and those investing in larger amounts. These set of investors, they add are also the quickest to withdraw when markets underperform. The SIP inflows from smaller towns and cities, meanwhile continued unabated and rose steadily.
Overall, the mutual fund industry is on a growth path, but its equity market returns raise several concerns on the back of global uncertainty, lofty valuations, rising bond yields, and firm commodity prices. As a result, investors are turning to be cautious and are avoiding aggressive growth in return for stability.
