MUMBAI: Two years of market volatility and lacklustre returns have done little to shake retail investors’ faith in mutual funds. Far from retreating, individual investors have strengthened their grip on the industry, with their share of total assets climbing to 64% in September 2026 — the highest since July 2024.
The latest data from the Association of Mutual Funds in India (Amfi) points to a significant shift in the industry’s investor mix. Even as market returns have disappointed, individual investors have continued to invest, helped by the growing popularity of systematic investment plans (SIPs), easier digital access and a greater understanding of market cycles.
The rising retail dominance has come at the expense of institutional investors, whose share of mutual fund assets has slipped to its lowest level in more than two years.
Fund managers believe the trend reflects a structural change in investor behaviour rather than merely a temporary shift in allocation.
“Good times generally follow bad times, and individual investors are increasingly aware of this,” said Anand Radhakrishnan, MD, Sundaram Mutual Fund. This growing understanding of market cycles, he said, has encouraged investors to increase their equity allocations even during an extended market correction.
The resilience of retail investors also reflects the role of distributors in preventing panic exits during market downturns.
Madhu Nair, CEO, Baroda BNP Paribas Mutual Fund, attributed the rising individual share to greater financial awareness and lower redemptions, aided by distributors who have helped investors stay the course through periods of volatility.
Ritesh Pathak, deputy chief business officer at Motilal Oswal Asset Management, pointed to a combination of factors: the popularity of SIPs, seamless digital onboarding, the industry’s expansion into tier-II and tier-III cities, and the higher risk appetite of younger investors.
While retail investors have been buying into market weakness, institutional investors have been pulling back for a different set of reasons.
Unlike individuals, who predominantly invest in equity, hybrid and passive schemes, institutions tend to park their money in liquid and debt funds. Their investment decisions are consequently driven more by short-term liquidity requirements, taxation and the availability of alternative fixed-income instruments.
Radhakrishnan said the narrowing gap between post-tax returns from debt mutual funds and direct investments in bonds has reduced the attractiveness of mutual funds for institutional investors.
At the same time, higher capital expenditure by companies has meant that more profits are being ploughed back into businesses, leaving smaller investible surpluses for deployment in mutual funds.
Nair, however, said the declining institutional share should also be viewed in the context of retail investments growing faster than institutional allocations. While institutions remain concentrated in liquid and money market schemes, individuals have steadily expanded their exposure to equity, hybrid and passive funds over the past two years.
Pathak said the contrasting investment patterns are reshaping the industry’s asset base. Institutional investments are typically lumpy and concentrated in debt securities, whereas individual participation is increasingly driven by regular, long-term contributions.
The result is a gradual shift from institution-led allocations towards a more retail-driven mutual fund industry.
And the shift may have further to run. Pathak expects individual investors’ share to continue rising as financialisation deepens and more households embrace equity mutual funds as a vehicle for long-term wealth creation.
Source: The Financial Express
