Mutual Fund AUM and Unique PANs Double in 5 Years Amid Rising Investor Interest in Higher Returns

Over the past five years, the mutual fund sector has experienced remarkable expansion, with Assets Under Management (AUM) soaring from ₹23.80 lakh crore in March 2019 to ₹53.40 lakh crore in March 2024. This reflects a strong compound annual growth rate (CAGR) of 17.5%, according to the latest AMFI-CRISIL Factsheet.

The rise in mutual fund AUM has outpaced the growth of conventional bank deposits, which increased from ₹126.39 lakh crore to ₹212.53 lakh crore over the same period, marking a CAGR of 11%. The shift in investor preference is largely attributed to the higher returns offered by mutual funds compared to fixed deposits.

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Changing Household Savings Trends

As of March 2023, household savings remained predominantly in physical assets, accounting for 71.5% of total savings, while financial assets comprised 28.5%. Within financial savings, traditional bank deposits and cash holdings have declined, whereas investments in mutual funds, life insurance, and Public Provident Fund (PPF) have gained traction.

Rise of Retail Investors and SIP Growth

Investor participation in mutual funds has seen a substantial rise, with the number of unique Permanent Account Number (PAN) holders in the sector more than doubling from 2.1 crore in March 2020 to 4.5 crore in March 2024.

Retail investors’ share in total AUM has grown from 19.8% in 2019 to 27.9% in 2024, indicating an increasing inclination toward mutual funds among individual investors. A significant driver of this trend has been the popularity of Systematic Investment Plans (SIPs), which provide a structured and affordable way to invest, especially in smaller cities and towns.

Expanding Mutual Fund Adoption Beyond Metro Cities

An important development in the mutual fund industry is its increasing penetration beyond metropolitan regions. The AUM share of the top five cities declined from 61.8% in 2019 to 52.6% in 2024, while investments from smaller cities nearly doubled from 9.9% to 18.7%. This trend highlights the growing participation of investors in Tier II and III cities, spurred by enhanced financial literacy and the accessibility of digital investment platforms.

Corporate vs. Retail Investment Trends

While retail investors' presence in mutual funds has strengthened, corporate participation in AUM has declined from 38.6% in 2019 to 35.5% in 2024. However, corporate investors continue to dominate the debt mutual fund segment, particularly in short-term instruments such as overnight funds, liquid funds, and money market funds, where they contribute over 80% of the AUM.