Investors Scale Back Direct Equity Purchases as Households Shift Savings to Mutual Funds, According to NSE Report
While individual investors have pulled back from direct participation in the equity market following record inflows in 2024, Indian households continue to invest their savings in equities through mutual funds. A recent report from the National Stock Exchange (NSE) reveals that despite a shift to net selling in 2025, the long-term confidence in equities as a wealth-building tool remains strong. The report highlights a significant structural change in how households are approaching equity investments, with a notable increase in mutual fund participation.
Moderation in Direct Equity Participation
The NSE report indicates that after an impressive net investment of Rs 1.7 lakh crore (approximately USD 19.8 billion) in 2024, individual investors became net sellers in 2025, with outflows totaling Rs 5,717 crore (around USD 0.6 billion). This shift marks a significant change from the previous five years, during which individual investors consistently contributed to the market. Despite this recent moderation, the cumulative net investments by individuals in the NSE’s secondary market over the past six years remain robust at Rs 4.5 lakh crore. This trend suggests a structural shift towards market-based savings, indicating that households are still committed to equity investments, albeit through different channels.
Preference for Mutual Funds
The report emphasizes that households are increasingly favoring indirect equity exposure via mutual funds, even as direct equity purchases have slowed down. This shift reflects a growing maturity among investors, who are recognizing the long-term benefits of equities as a viable asset class for wealth creation. Notably, individuals, both directly and through mutual funds, now hold 18.75 percent of listed equities, the highest share recorded in over two decades. The total value of these individual holdings is estimated at around Rs 84 lakh crore, significantly surpassing the levels seen in March 2020. Nearly half of household equity exposure is through direct shareholding, while the remainder is invested through mutual funds, showcasing a balanced approach to equity investments.
Impact on Household Wealth
The NSE report also highlights the substantial impact of equity investments on household wealth. Since April 2020, cumulative household wealth creation has been estimated at Rs 53 lakh crore, illustrating the critical link between capital markets and household balance sheets. This wealth accumulation influences consumption patterns and boosts investor confidence over time. Although there was some volatility in the second quarter of FY26, household equity wealth rebounded strongly in the first quarter, following a sell-off in the latter half of FY25. However, a moderation in household wealth was observed during the September quarter, partially offsetting earlier gains.
Growing Role of Capital Markets
As of September 2025, the combined value of household equity exposure, including both direct ownership and mutual funds, stands at approximately Rs 84 lakh crore. This figure underscores the increasing significance of capital markets in household savings strategies. The report indicates that individuals account for about 84 percent of equity assets under management (AUM) in mutual funds, further demonstrating the pivotal role that mutual funds play in the investment landscape. Despite recent fluctuations, the overall trend points to a sustained commitment from households towards equity investments, reinforcing the notion that equities remain a key avenue for long-term wealth creation.
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