Listed Firms’ Mutual Fund Investments Hit Record ₹3.8 Trillion in FY25 Amid Cash Surplus and Weak Capex Appetite

Investments by listed Indian companies in mutual funds (MFs) have touched a record level, driven by surplus cash, subdued capital expenditure (capex) appetite, and low deposit rates. According to data from the Centre for Monitoring Indian Economy (CMIE), non-finance companies invested ₹3.8 lakh crore in MFs during FY25, the highest since records began in 1990-91.

The study covered 1,569 non-finance companies with available data for FY25. Even with a partial sample, the figure surpassed the previous high of ₹3.6 lakh crore in 2020-21. Analysts note that uncertainty, limited growth opportunities, and lower bank deposit interest rates have encouraged companies to channel excess liquidity into mutual funds rather than large-scale capex.

Surplus Cash Driving Investments

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Corporate cash balances among non-finance firms also reached a record ₹7.4 lakh crore in FY25, more than double the ₹3.4 lakh crore seen before the pandemic. Capacity utilisation stood at 75.5% as of March 2025, according to the Reserve Bank of India’s survey, signalling underused assets. With limited scope for new factory or capacity expansion, surplus cash is increasingly being diverted to financial avenues like MFs.

Mutual fund investments accounted for 3.2% of corporate assets in FY25, consistent with trends over the past two decades. The highest share was 4.3% in 2016-17, when demonetisation drove surplus liquidity into financial instruments.

Preference for Fixed Income Funds

Industry experts suggest most of these allocations are being deployed in fixed income rather than equities, reflecting companies’ conservative approach to capital preservation. “Companies are not seeing the kind of growth opportunities where they can do unbridled capex,” said Sandeep Bagla, Chief Executive Officer of Trust MF. Lower bank deposit rates are also playing a role. In July 2025, scheduled commercial banks offered fresh deposits at an average of 5.61%, the lowest in nearly three years, making MFs relatively more attractive.

Broader Market Trends

When unlisted companies and financial firms are included, corporate investments in MFs are much larger. Data from the Association of Mutual Funds in India (AMFI) shows total corporate MF investments, including holding companies, reached ₹23.6 lakh crore in FY25. This represents a sharp jump from ₹9.6 lakh crore in FY19. Within this, equity fund investments rose 129% to ₹5.4 lakh crore between FY19 and FY25, while non-equity allocations surged 152 lakh crore to ₹18.2 lakh crore.

Outlook

Analysts believe that until growth prospects improve and capacity utilisation rises, companies are likely to continue deploying their surplus into mutual funds. This trend highlights both corporate caution on fresh investments and the increasing role of MFs as a preferred liquidity management tool.