The joy-train of mutual fund (MF) investments in India has been chugging along merrily. The ubiquitous Systematic Investment Plan (SIP) has become almost a household expression. The total investments in MFs have grown from around ₹15 lakh crore in July 2016 to ₹86 lakh crore in July 2026 — a CAGR of about 19 per cent. But there’s a question too: is this “Vande Bharat” beginning to lose momentum?

There are reasons for this question. The Sensex, the bellwether for the general market-watcher, and the Nifty-50, more the experts’ GMT, are both about 7-8 per cent below their levels 12 months ago. Barring funds focused on mid- and small-cap companies, most of the 2,000-odd schemes managed by India’s about 45 asset management companies have delivered flat to negative returns. Certainly, the party is not over, though the wine has lost some of its bubble. The growth in the number of unique mutual-fund investors — one person counted only once irrespective of how many schemes he or she owns — deserves a closer look.

The data above shows that the annual addition is declining. These numbers suggest that the mutual fund industry may no longer be adding retail investors at the pace seen earlier.

Global uncertainties have now clouded the horizon. President Trump's unpredictable decisions on trade, tariffs, visas, energy and the environment have upended forecasts on interest rates, inflation and growth. Donald Trump has proved to be any forecaster's nightmare. With the US being the world's largest economy by a wide margin, “Trumponomics” has become the joker in the global pack.

India, however, has its own story. The mutual fund industry has played an important role in financialising household savings and providing capital for growth. If India maintains around 10 per cent nominal annual GDP growth for the next 20 years, a $32-trillion economy by 2047 is certainly achievable (USD/INR rate not reckoned for), using the simple rule of 72 calculation. With Total Fertility Rate now below two, the denominator for per-capita income will not only not grow, it may decline. Reaching middle-income-country status by 2047 is therefore plausible, barring any Black Swan events and assuming domestic political stability and policy continuity, irrespective of who wins elections.

The mutual fund habit has spread largely by word of mouth. Most dinner, party and casual conversations now touch upon SIPs and mutual-fund returns. Fund names and the ubiquitous SIP — some may not even know its expansion, never mind — slip off the tongue with practised ease. Ordinary people are excited that they are earning, in their parlance, "money for jam" — wealth without work.

Recently, the habit has also spread to B30 (Beyond the top 30) centres — the Karimganjs, Hapurs and Lakhimpurs of India. SEBI, AMFI, AMC companies led by market leader SBI Mutual Fund and the banking distribution network have all helped push this growth. The result is a remarkable shift of household savings towards financial assets.

As SEBI chief, Tuhin Kanta Pandey told mutual funds last month: "We must deepen participation. The next generation of investors will increasingly come from smaller towns, first-time investors and under-represented segments. Products, distribution and communication must adapt accordingly”. The number of “investor-havenots” has to come down so that the gains are shared more equitably.

There is an allied development reflecting the general mood — the IPO market. Last year, companies raised about ₹1.75 lakh crore through IPOs. This year so far, mobilisation is around ₹47,000 crore, including ₹10,000 crore by SBIMF. Larger issues such as Jio and NSE are in the offing. In this market, MFs have batted for ordinary investors. For instance, top sources in MFs said that in their role as anchor investors in NSE, they insisted on offering the shares at an issue price of about ₹1,800 as against ₹2,100 proposed, so that retail investors benefit more.

In the real economy, the 7-8 per cent GDP growth is not merely a statistic. Consumer-goods sales, for instance, are growing at healthy rates (about 15/20%). Cash-transfer schemes being introduced or the quantum being increased in several States have also put additional purchasing power in people’s hands. However, retail inflation reflected in the prices of sugar, onion, pulses and commercial LPG cylinder rates affects the common man. So the Government and RBI have to ensure that price hikes do not lead to economic hardships.

Infrastructure spending by the Centre is another important ballast. Capital expenditure, which was around one per cent of GDP or lower earlier, is now around 3-4 per cent as per Union Budgets since 2022. The Centre’s innovative 50-year interest-free loan scheme for States, involving around ₹1.5 lakh crore annually for capital expenditure, has added another push.

But perhaps the most unsung transition is having an impact on the democratisation of investments in the capital markets in rural and remote India through financial inclusion, pioneered by our banks.

People who once could barely sign their names are today using UPI, a direct jump from Third to First world. A roadside vegetable vendor in India can use digital payments for sourcing her supplies in bulk whereas for a similar transaction, an American, Briton or European may still be writing out a cheque. Indians have become extraordinarily tech-friendly. Their receptivity to financial innovation — and their aspirations — have skyrocketed.
That aspiration translates as effective demand. Once people acquire financial awareness and aspiration, you cannot hold them down easily.

SEBI deserves credit for an approach that is, thankfully, Indian — growth with customer protection. This is preferable to the purely caveat-emptor, “innovate-till-you-cannot-make-it-more-complex” philosophy in the US, where innovation can run ahead of the customer’s ability to understand the risks. The global financial crisis of 2008 remains a stark reminder: bundled home-loan mortgages were among its proximate causes and exposed the perils of letting innovation outrun comprehension.

The need now seems to be for forward movement with caution — by the regulator, the industry and the distributors — and a continued country-first, Antyodaya-first, approach. Our goal cannot merely be more money flowing into mutual funds. It must be more Indians participating responsibly in, and benefiting from, India’s growth story. In short, our equity market engagement must lead to “growth with equity”.