Balasubramanian credited this transformation to consistent investor awareness campaigns run over the last seven to eight years. “If you ask a hall full of people how many have invested in mutual funds, only a few hands may go up. But if you ask how many have invested in SIPs, nearly everyone raises their hand. SIPs are now becoming a way of life for the Indian investing public,” he told ET Now.
From savings to investments: A shift in mindset
Historically, Indian households preferred gold, silver, and bank deposits as their primary savings tools. However, with falling interest rates and savings accounts yielding barely 2.5%, SIPs have emerged as a compelling alternative. Over the past 5–15 years, SIP returns have averaged around 9–10%, comfortably beating inflation and offering investors the power of compounding.Balasubramanian noted that retail investors now view SIPs less as speculative stock market bets and more as a dependable long-term wealth-building mechanism. Even when equity markets fluctuate, SIP flows remain stable, showing resilience in investor behavior.
Expanding beyond urban India
While mutual fund penetration was once limited to metros, the landscape is changing rapidly. In 2016, there were just about 1.8 crore unique mutual fund investors, with nearly 93% of contributions coming from the top 15 cities. Today, participation from beyond the top 30 cities (B30) has surged to nearly 26% of industry inflows, signaling deeper financial inclusion.
“Technology has been a game-changer in reaching every corner of the country. At ABSL AMC, we have also expanded our physical presence with 30 new branches in smaller towns this year alone. As more households embrace digital investing, we see the base of SIP investors widening significantly,” Balasubramanian said.
Rising household savings to power mutual fund growth
India’s household savings pool stands at around Rs 950 lakh crore, of which nearly Rs 70 lakh crore is invested in equities and mutual funds. With rising incomes from agriculture, services, and self-employment, Balasubramanian expects SIP flows to rise further in the coming quarters.
“We began this year with Rs 21,000–22,000 crore in monthly SIP inflows. That number has already touched Rs 28,000 crore by August. With higher disposable incomes due to tax cuts, GST rationalization, and falling interest rates reducing EMIs, SIP contributions could easily rise to Rs 30,000–35,000 crore by year-end,” he said.
Active vs passive funds: A coexistence model
On the ongoing debate between active and passive fund strategies, Balasubramanian stressed that both will coexist. “As the industry matures, active fund managers will continue to differentiate themselves through stock selection and tactical sector allocation, aiming to deliver 1–2% above benchmarks. At the same time, passive funds offer low-cost exposure and will attract a different segment of investors,” he explained.
He also pointed out the growing popularity of multi-asset allocation funds that combine equities, debt, gold, silver, REITs, and InvITs—giving retail investors a balanced portfolio option without active rebalancing.
Domestic flows to drive next bull run
Despite heavy foreign investor outflows over the last two years, Indian equity markets have remained resilient thanks to robust domestic flows. Balasubramanian believes that foreign institutional investors (FIIs) cannot ignore India for long, especially as valuations become attractive and U.S. interest rates start to decline.
“With the U.S. Federal Reserve expected to cut rates further by up to 150 basis points, global investors will return to India. Coupled with rising domestic SIP inflows, this could set the stage for the next leg of India’s bull market by FY26–27,” he said.
Bottomline
From being seen as risky stock bets to becoming an everyday savings habit, SIPs have redefined household investment patterns in India. With participation expanding beyond metros, steady inflows despite market volatility, and growing financial literacy, mutual funds are poised to play a pivotal role in India’s journey towards becoming a $10 trillion economy.
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