Megatrends Powering India’s Retail Investing Boom

The rise of retail investing in India is not just a story of “more people opening demat accounts.” The Bain report, How India Invests 2025, points to a set of structural forces that are changing who invests, how they invest, and which channels they use. Together, these forces help explain why flows into mutual funds and equities have scaled so quickly over the last few years and what could sustain, or disrupt, that trajectory.

Rather than a single trigger, the report highlights five reinforcing megatrends: younger investors entering early, growth from beyond the top cities, regulatory reforms that have increased trust, better digital and physical infrastructure, and strong market performance amplified by a surge in financial content.

Young, tech-savvy investors are becoming a core cohort

The first structural driver is demographic. India’s retail investor base is getting younger, and that shift is happening quickly.

The share of Gen Z in the NSE-registered investor pool under the age of 30 has risen from about 25% in FY20 to around 40% in FY25. This cohort is entering markets through smartphones, Aadhaar-based KYC, UPI rails, and app-first brokers, often with a much lower friction to start than earlier generations faced. Digital platforms, including discount brokers and investment apps, have made investing paperless, accessible, and relatively intuitive, especially for first-time participants.

The opportunity is clear: starting earlier extends the compounding runway and normalises equity and mutual fund exposure as part of a standard household portfolio. At the same time, Bain’s segmentation work notes that younger investors, particularly Gen Z on digital platforms, tend to be more reactive to market movements and more inclined toward mid-cap, small-cap, or thematic narratives during strong markets. The same traits that support faster adoption can also amplify sensitivity to volatility.

B30 and Tier-2+ cities are driving a large share of new flows

The second megatrend is geographic. Growth is no longer driven only by metro and large Tier-1 cities.

The report highlights that roughly 55–60% of new SIP registrations now originate from B30 cities, that is, locations beyond the top 30 cities by mutual fund AUM. In mutual funds and direct equity, digital platforms report that investors from Tier-2+ cities make up a growing share of their base, now accounting for about half of investors on some large digital platforms. This expansion means that more surplus savings from smaller cities and towns are flowing into capital markets rather than being confined to local real estate or gold.

The broadening of participation has several implications. It reduces concentration risk in the investor base, extends the reach of formal financial products, and links regional savings more closely to national market performance. At the same time, behavioural data shows that Tier-2+ investors on digital platforms often exhibit higher trading activity relative to their AUM than metro peers. That combination, fast growth and higher trading intensity, makes investor education and risk communication particularly important in these markets.

SEBI reforms have strengthened trust in market infrastructure

Regulation is the third structural tailwind, and much of it has been focused on simplifying products and improving perceived fairness.

The report points to several SEBI initiatives that have had a cumulative effect on investor confidence. The removal of the No-Objection Certificate (NOC) requirement to change mutual fund distributors has made it easier for investors to switch intermediaries. Scheme rationalisation has reduced product clutter by placing funds into clearer, more standardised categories. The introduction of uniform expense ratio caps has limited the scope for opaque pricing differences across comparable schemes.

These steps sit alongside broader efforts around disclosure, surveillance, and suitability. Bain analysis frames these reforms as part of the reason mutual funds and equity products are increasingly viewed as more transparent and accessible. The effect is not that markets have become risk-free; rather, the rules around fees, categories, and distribution are more predictable than they were a decade ago.

Digital and physical distribution are reinforcing each other

The fourth megatrend is the maturation of distribution infrastructure, both online and offline.

On the digital side, fully online onboarding, including e-KYC, is now standard for many platforms. Industry utilities such as MF Central and MFD Empowerment have simplified transactions and servicing across asset management companies (AMCs) and channels, particularly benefitting investors and distributors in Tier-2+ regions. New-age platforms like Groww, Zerodha, and Upstox have become important entry points for first-time equity and mutual fund investors, and such platforms now account for a large majority of retail direct equity investors by number.

At the same time, physical and advisor-led channels remain central to reach. Campaigns such as AMFI’s “Mutual Funds Sahi Hai” and “Bharat Nivesh Yatra,” and the continued role of bank branches, mutual fund distributors, and post offices, provide the on-ground interface for investors who prefer face-to-face guidance or operate in lower-digital-penetration areas.

The report emphasises that the most effective expansion has come from the interplay between these modes. Digital infrastructure manages onboarding, execution, and ongoing portfolio access, while physical channels support trust, explanation, and hand-holding where needed. Both sides are part of the same ecosystem rather than substitutes.

Market performance and financial content have reshaped return expectations

The fifth driver combines realised returns and a changing information environment.

On performance, the report notes that key Indian equity indices such as the Nifty 50 and Sensex have delivered around 10–15% annual returns over the last decade. This comparatively strong track record, particularly against traditional household assets, has reinforced the idea of equity as a viable long-term wealth-creation tool.

At the same time, there has been a notable increase in the volume and reach of financial content, with the rise of regional and digital financial education across YouTube, Instagram, and fintech apps. Concepts like SIPs, diversification, and index investing are now discussed in multiple Indian languages and across formats that match how younger and Tier-2+ investors consume information. This content layer has made investing vocabulary more familiar and has supported the shift from pure savings to more explicit investing behaviour.

The report also implicitly acknowledges that this is a powerful channel that requires oversight. The same digital platforms that distribute sound, educational content can also distribute less balanced or speculative messages, which is why regulators have begun to increase scrutiny of online advice and influencer-led communication.

How structural are these trends?

Taken together, these megatrends explain much of the expansion in India’s retail investor base. A younger, more digitally native cohort is entering markets; investors from B30 and Tier-2+ cities are increasingly active; regulatory reforms have made products clearer and fee structures more transparent; distribution infrastructure combines digital convenience with on-ground presence; and strong equity performance has been amplified by a growing financial-content ecosystem.

The report presents these as structural drivers rather than short-term anomalies, while also noting that future market cycles, regulatory choices, and the economics of distribution will influence how they evolve. For now, they form a useful lens for understanding why retail investing in India looks meaningfully different in 2025 than it did a decade ago.

Brand Manager

Aayushi Thakur

Frequently Asked Questions

Q: What does the report say about Gen Z’s role in India’s markets?

A: It finds that Gen Z has become a significant part of the investor base, with its share of NSE-registered investors under 30 rising from about 25% in FY20 to around 40% in FY25. This group is entering primarily through digital platforms and app-based brokers.

Q: How important are B30 and Tier-2+ cities in new mutual fund flows?

A: According to the report, roughly 55–60% of new SIP registrations now come from B30 cities, indicating that much of the recent mutual fund growth is being driven from beyond the traditional top-city centres.

Q: Which SEBI reforms does the report highlight as improving investor trust?

A: It points to removal of the NOC requirement for changing mutual fund distributors, scheme rationalisation, and uniform expense caps, alongside broader disclosure and surveillance measures, as key steps that have strengthened confidence.

Q: What role do digital platforms play in expanding participation?

A: Digital platforms enable paperless onboarding, easy transacting, and access to direct plans.

Q: How has recent equity performance influenced retail investing behaviour?

A: Indian equity indices have delivered roughly 10–15% annual returns over the last decade, and that this performance, communicated through a growing financial-content ecosystem, has supported a shift from pure savings towards more explicit, market-linked investing.

Sources

How India Invests 2025 – Bain & Company