Widely read:
The Economic Survey 2025 presents insightful trends on investor participation, mutual fund growth, and risks associated with global and domestic market movements. Here are the key takeaways.
Rise in retail investor participation
- Since the pandemic, there has been a surge in individual and household participation in capital markets, both directly (trading) and indirectly (mutual funds).
- Demat accounts rose 33 per cent YoY to 18.5 crore as of December 2024.
- The total unique investors in mutual funds doubled from 2.9 crore in FY21 to 5.6 crore by December 2024.
- Mutual fund AUM grew by 25.3 per cent YoY to Rs 66.9 lakh crore, reflecting higher retail participation.
Systematic Investment Plans (SIPs) at an all-time high
- The mutual fund industry has 10 crore+ SIP accounts, with cumulative SIP inflows reaching Rs 10.9 lakh crore.
- Monthly SIP contributions have more than doubled in three years, from Rs 0.10 lakh crore in FY22 to Rs 0.23 lakh crore in FY25.
- SIPs have played a major role in reducing market volatility by providing a consistent inflow of funds.
Market capitalisation and performance
- BSE market capitalisation crossed $5 trillion for the first time on May 23, 2024.
- By December 2024, BSE's market capitalisation had grown 14.2 per cent year over year to reach Rs 445.2 lakh crore, with a market cap-to-GDP ratio of 136 per cent.
- India's weight in the MSCI Emerging Markets Index peaked at 20 per cent in July 2024 before stabilising at 19.4 per cent in December 2024.
Foreign portfolio investments (FPI) and global risks
- FPIs increased investment in Indian equities from June to September 2024 but later withdrew $11.5 billion in October 2024 and $2.5 billion in November 2024 due to global concerns, high valuations, and geopolitical risks.
- The US stock market's elevated valuations pose a risk to Indian equities, as historical data shows that major corrections in the S&P 500 tend to trigger Nifty 50 downturns.
- Despite these withdrawals, domestic retail and institutional investors have supported Indian equity markets.
IPO and debt market developments
- India accounted for 30 per cent of global IPO listings in 2024, up from 17 per cent in 2023.
- Rs 11.1 lakh crore was raised from primary markets (equity + debt) between April and December 2024, a 5 per cent increase over FY24.
- The corporate bond market remains underdeveloped, with a capitalisation of only 18 per cent of GDP (compared to 80 per cent in South Korea).
Final thoughts
- Retail investors have become dominant in Indian markets, with record demat account additions, SIP growth, and mutual fund inflows.
- Global risks, especially a US market correction, remain a key concern, as the Indian stock market is historically sensitive to US trends.
- Mutual funds and SIPs have provided market stability, and index investing is becoming increasingly relevant in India's evolving investment landscape.
These insights highlight the resilience of Indian markets but also emphasise the importance of cautious investing in a globally uncertain environment.
Also read: PM Modi invokes Goddess Lakshmi ahead of Budget Session, prays for poor and middle-class
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