How India’s Household Savings Are Shifting Toward Investing

India’s household balance sheet has changed meaningfully over the past decade. According to Bain & Company’s How India Invests 2025 report, Indian households held about ₹1,300–1,400 lakh crore of total wealth by the end of FY25, growing at roughly 13% a year over the last five years. The headline is not just the pace of growth, but the mix: a steady move away from a pure savings mindset centred on deposits, cash, gold, and real estate and toward a more capital-markets-led investing approach.

Bain’s analysis characterises this as an early-stage but clear transition. A larger share of household wealth is now in “investable assets”, and within that bucket, equities and mutual funds are gaining ground.

From Physical to Financial: A Tilt in the Balance Sheet

Of the ₹1,300–1,400 lakh crore in household wealth, around 35% now sits in investable assets such as mutual funds, listed equities, AIFs, deposits, small savings, and cash. That segment has grown at about 17% annually over the last five years, faster than the overall household balance sheet.

Within that mix, traditional bank deposits and idle cash have been losing relative share, pressured by lower real returns and greater awareness of other investment options. Physical assets, particularly real estate, have also seen their dominance soften over a longer horizon. The report notes that policy measures such as demonetisation and RERA increased transparency and compliance costs in property markets, and while prices have rebounded in recent years, the broader shift toward financialisation has continued.

On the other side, mutual funds and listed equities have become more prominent in household portfolios. Over roughly the last decade, mutual funds have gained about 5 percentage points and direct equities about 10 percentage points in salience within the investable-assets basket. The drivers are familiar: better financial literacy, sustained equity-market performance, regulatory and industry campaigns, and the rise of low-friction digital platforms that make it easier to open and fund investment accounts.

The Capital Markets Gap: India vs Global Peers

Despite the growth in domestic participation, India remains under-allocated to capital markets when compared with some other large economies. Bain’s comparison of household portfolios shows that mutual funds plus listed equities account for only about 15–20% of Indian household investable assets. In markets such as the US and Canada, the equivalent figure is around 50–60%, and in Brazil it is approximately 40–45%.

This gap is not presented as a value judgement in the report, but as a structural difference. It highlights that even after a decade of increased participation, capital-market allocations in India are still well below levels seen in some peer markets, which in turn points to ongoing headroom for further financialisation if current trends continue.

Mutual Funds: Higher Penetration, Larger Balances

The mutual fund segment illustrates the scale of change underway. Mutual fund assets under management (AUM) for individuals reached roughly ₹41 lakh crore by the end of FY25. Over the preceding five years, household MF penetration doubled from about 5–6% to around 10–11%, with growth led by equity-based funds and systematic investment plans (SIPs).

Looking ahead, Bain’s base case is for individual mutual fund AUM to rise beyond ₹300 lakh crore over the next decade. Household penetration is projected to double again to around 20%, and average AUM per household is expected to increase as investors stay invested for longer and gradually raise contribution sizes.

The report draws an analogy with developed markets such as the US and Canada, where penetration typically rises first and per-household balances follow with a lag of 5–10 years. India, in this framing, is at a relatively early point in that curve: the initial phase of broadening participation, with the main uplift in wallet share still to come if behaviour remains consistent.

Direct Equity: More Investors, Larger Ownership

Direct equity participation has followed a similar trajectory, with more volatility. As of FY25, individual holdings in listed equities are estimated at about ₹42 lakh crore. Demat accounts have grown nearly five-fold over five years, helped by a strong IPO cycle, the expansion of discount brokerages, and a younger investor base coming into markets.

Bain projects that, over the next decade, direct equity holdings could rise to roughly ₹250 lakh crore. The investor base is expected to widen to more than 12 crore individuals. A key assumption underpinning this forecast is that a greater share of investors will gradually shift from short-term speculative activity toward longer-term ownership of businesses, allowing equity holdings to compound over time rather than being recycled rapidly through trading.

What an “Investing Mindset” Looks Like in Practice

The report’s reference to a “paradigm shift toward an investing mindset” is grounded in observable portfolio behaviour on digital platforms rather than in abstract sentiment.

Across the data, mutual funds are becoming more central within investor portfolios, with pure direct equity accounting for a smaller share of total AUM than before. Trading velocity, measured as trades relative to equity AUM, has declined from about 4.6 to 3.2 over two years, suggesting lower churn. SIPs remain the dominant route into mutual funds, with lump-sum investing gaining share as investors gain experience and confidence.

In combination, this points to more diversified portfolios, longer holding periods, and increasing ticket sizes over time. These are the markers Bain highlights when it describes a shift from a transactional, savings-plus-trading mindset toward a more deliberate investing approach.

Three Areas of Caution

The report also flags several areas where the trajectory bears watching.

First, recent behaviour has benefited from supportive markets. Over the past decade, Indian equities have delivered annual returns in the range of 10–12%, while real estate returns have been closer to around 6%, based on the data cited. Strong equity performance naturally encourages flows and makes long-term investing look straightforward. The more demanding test of behaviour will be how investors respond if returns moderate or if there is a prolonged period of volatility.

Second, deposits remain an important anchor. For many households, fixed deposits continue to function as the core “risk-free” component of their financial lives. When interest rates are relatively attractive and markets are volatile, there is scope for some shift back from market-linked products to deposits, especially among newer investors.

Third, access is uneven. Penetration gains in large cities and digitally connected Tier-2 and Tier-3 locations can conceal gaps in participation elsewhere. The national aggregates in How India Invests 2025 mask significant differences across income segments, regions, and levels of digital access.

The Direction of Travel

Taken together, the findings suggest that India has crossed an important threshold in the way households manage their money. Investable assets are a larger share of household wealth. Within that category, allocations to mutual funds and listed equities are rising, while deposits and some categories of physical assets are losing relative share. Digital platforms, regulatory efforts, and industry initiatives have reshaped the channels through which households participate in markets.

At the same time, the report is careful to stress that this is still an early-stage transition. With only 15–20% of investable assets in capital-market instruments, India remains under-allocated to public markets compared with several peers. The patterns described in How India Invests 2025 show a system in motion rather than a finished destination: a household balance sheet that is gradually tilting from savings toward investing, with the next phase likely to be determined by how investors behave across different market cycles, how access expands beyond early adopters, and how policy and industry practices respond.

Research Analyst

Simran Mehla

Frequently Asked Questions

Q: How is India’s household balance sheet changing according to Bain?

A: The report finds that while overall household wealth has grown, the mix is shifting from predominantly physical assets and deposits toward a larger share in financial and capital-market instruments such as mutual funds and listed equities.

Q: How large is India’s household wealth pool today and how fast is it growing?

A: Bain estimates total household wealth at about ₹1,300–1,400 lakh crore by end-FY25, growing at roughly 13% annually over the last five years.

Q: How much of Indian household investable assets are in mutual funds and direct equity?

A: The report indicates that mutual funds plus listed equities together make up only about 15–20% of household investable assets, versus 40–60% in some developed markets.

Q: What penetration levels does the report project for mutual funds by 2035?

A: Household mutual fund penetration is estimated to have risen to about 10–11% by FY25. Bain base case is that this could reach around 20% over the next decade, alongside higher AUM per household.

Q: What behavioural changes signal a shift from “saving” to “investing” in the data?

A: Bain highlights rising mutual fund salience in portfolios, lower trading velocity in direct equities, and the continued dominance of SIPs as indications that more households are favouring diversified, longer-term holdings over frequent trading.

Sources

How India Invests 2025 – Bain & Company