More retail investors choosing direct route as mutual fund industry expands beyond metros: Report

Retail participation in India’s mutual fund industry continues to deepen, with a growing number of investors taking charge of their portfolios directly, according to the latest data from the Association of Mutual Funds in India (AMFI), analysed by ICRA Analytics. As of September 2025, approximately 27.37% of retail investors chose to invest through the direct route, reflecting rising investor awareness, digital adoption, and confidence in managing investments independently.

The data also showed that 65.30% of retail investors preferred investing through Non-Associate Distributors (NADs), highlighting that while self-directed investing is on the rise, intermediaries and advisors continue to play a significant role in attracting and guiding new investors.

Among High Net Worth Individuals (HNIs), the inclination toward direct participation was even higher, with 28.90% of HNI assets invested directly. Overall, 47.70% of the mutual fund industry’s total assets were invested directly, while 45.96% came via NADs — a sign of growing maturity and self-reliance among Indian investors.

Expanding beyond metros

The mutual fund industry’s footprint beyond India’s major cities continued to expand steadily. Data showed that 19% of the industry’s total assets originated from B30 (Beyond Top 30) locations in September 2025. Assets from these regions grew from Rs 14.14 lakh crore in August 2025 to Rs 14.50 lakh crore in September 2025, marking a 2.6% month-on-month increase and an impressive 15% annual growth.

Assets from T30 (Top 30) locations also grew 14% year-on-year, underscoring broad-based investor interest across both urban and non-urban markets.

B30 investors remain predominantly equity-oriented. As of September 2025, 76.60% of assets from B30 locations were parked in equity schemes, 9.12% in balanced schemes, and 11.67% in debt-oriented schemes. In contrast, investors in T30 cities displayed a more diversified approach, with 30.39% of their assets in debt funds, reflecting a more conservative and risk-managed investment strategy.

In terms of ownership, 27.52% of assets held by individual investors came from B30 regions, up from 26.94% in September 2024. Institutional participation from smaller cities remains limited, with 4.93% of institutional assets from B30 areas compared to 4.82% a year earlier, while 95.07% of institutional assets continue to be concentrated in T30 cities.

Fund categories

According to ICRA Analytics, India’s mutual fund industry has demonstrated consistent long-term performance across both equity and debt categories, despite short-term volatility. Equity mutual funds posted positive average returns over 3-year, 5-year, and 10-year horizons, although 1-year returns turned negative due to global market headwinds.

Small-cap funds outperformed all categories, delivering an impressive 27.59% average return over five years, while large-cap funds reported a 1-year average decline of 4.92%. Analysts attributed the short-term weakness to global uncertainties but noted that India’s long-term equity outlook remains strong, supported by retail inflows and the resilience of mid- and small-cap segments.

In the debt fund space, credit risk funds led performance across multiple time frames, achieving a 6-month annualised return of 10.02%. Low duration funds posted the highest 1-month return of 18.57%, while Gilt Funds with 10-year constant duration delivered a 10-year average return of 7.76%.

ICRA Analytics noted that all debt fund categories generated positive returns across all key time periods, underscoring the sector’s stability amid steady interest rates and prudent fiscal management.