India’s $3.3 trillion opportunity for global fund houses

This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.

Reportedly, the world’s fourth largest asset manager, State Street, is looking to buy a stake in an Indian fund house.

Global companies, from the U.S. to South Korea, are looking to list their Indian business units, building on the boom in the country’s primary market, and offering fund houses more avenues to invest.

Accelerating financialization of Indian household savings is driving flows: as more retail investors participate in capital markets, the opportunities for asset managers to handle those funds are ballooning.

Global consultancy firm Bain & Company estimates retail investor-driven assets of Indian mutual fund industry to grow to 300 trillion rupees ($3.3 trillion) by 2035 from 45 trillion rupees in fiscal year 2025.

There is substantial room for growth in the industry, as India’s individual mutual fund assets are less than 15% of its GDP, compared to 80% for mature economies such as the U.S. and Canada, said Rakesh Pozhath, Partner, Bengaluru, Bain.

Salaried millennials in metro cities and Gen Zs are increasingly investing savings in mutual funds, even avoiding direct equities, the report said. For a large chunk of investors, making monthly investments has become part of discipline. As a result, the share of long-term mutual fund holdings is on the rise, Bain said.

Investment through systematic investment plans, which refer to investing bite-sized sums at regular intervals, tripled to 2.89 trillion rupees in fiscal year 2025 from 2021, data from Association of Mutual Funds in India shows.

India’s central bank has noted that retail investors are increasingly preferring equity investments, primarily through mutual funds, over traditional saving instruments. The Reserve Bank of India said in August that the share of mutual funds in the household sector’s gross financial savings climbed to 6% in the year ended March 2023 from 0.9% in fiscal year 2012.

As the Indian economy has grows, surplus incomes across middle class and upper middle class are being invested across multiple financial products, said Vivek Sharma, head of international business at Nuvama Private.