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.
The big story
The growing pool of investors in India is increasingly attracting global attention — and renewed interest from fund houses.
This year, the world’s largest fund house, BlackRock, launched multiple mutual fund schemes in India through Jio BlackRock, marking the U.S. firm’s reentry after its exit in 2018.
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.
Offering scale
The Indian mutual fund industry has become sizeable enough to attract the attention of global fund houses, experts say.
“In the last decade, many global fund houses either exited or meaningfully reduced their presence in India because the growth of the industry was not there,” said Hiren Dasani, chief investment officer for Emerging Markets at WhiteOak Capital.
Now, mutual fund assets have grown enough to garner the interest of even large global asset managers, he said.
BlackRock, which in a joint venture with billionaire Mukesh Ambani’s Jio Financial services set up Jio BlackRock Asset Management, received regulatory approval to launch mutual funds in May this year. In July, it raised raised more than $2.1 billion across three fund schemes.
In an interview to Bloomberg in September, Sid Swaminathan, chief executive officer of Jio Blackrock Asset Management, said he expects the Indian mutual fund industry to triple in the next seven years.
India’s growing pool of young, long-term investors is not just an opportunity for global fund houses, but also for multinational companies.
The Indian primary market has been extremely hot this year, even as the secondary market cooled off.
The country has seen companies raise $11.4 billion via 252 IPOs during the first three quarters of the year, and with many big-ticket listings — LG Electronics, Tata Capital and Lenskart — coming in the final quarter, the final amount of funds raised is expected to be higher than last year’s $19.9 billion.
While the debate over some IPOs being overpriced continues, experts say robust domestic liquidity is absorbing a large number IPOs, no matter the size.
Take the case of LG Electronics’ India IPO, whose institutional book was over subscribed 150 times.
According to data shared by India capital market research firm Prime Database with CNBC, of the 1.6 trillion rupees raised by large IPOs in India in 2025 around 22% was invested by mutual funds.
While the companies benefited from heavily oversubscribed IPOs, mutual funds saw their investments soar. IPO returns for the first three quarters of the year stand at 17.7% during, compared to just 4.4% for the benchmark BSE Sensex, according to an EY report.
The opportunities arising from India’s shift to financial assets, don’t just end here. Experts say the final avenue that this growing pool of investors could unlock is the flow of capital into global market.
Investors in India are also keen to invest in U.S. equities to participate in themes such as the AI boom, or bet on China’s revival, but their participation is limited due to capital control norms.
Mutual funds, however, allow them to gain overseas exposure — though it is capped at $7 billion for the whole industry — said Dhiraj Agarwal, managing director, at Ambit Investment Managers.
“Offshore investments vehicles in India are seeing great traction,” he added.
Given the growing demand and the size of the industry, most experts see access to overseas investments improving for small investors, in turn making the AUM opportunity for global funds more attractive.
Top TV picks on CNBC
In an exclusive interview, S. Krishnan, secretary at India’s Ministry of Electronics and IT, said the country was focusing on AI applications, expanding data centers, and jobs through indirect growth.
Evan Feigenbaum from Carnegie Endowment for International Peace said there was no major problem India faces to which closer ties with Russia is the solution, but India-China hold considerable unrealized economic potential.
Stefano Baronci of ACI Asia-Pacific & Middle East said the flight cancellation issues at Indian carrier IndiGo was a “transitional setback,” adding that India’s air passenger market will lead the region’s growth.
Need to know
Big Tech is doubling down on investing billions in India. In under 24 hours, Microsoft and Amazon pledged more than $50 billion toward India’s cloud and AI infrastructure, while Intel on Monday said it plans to make chips in the country.
Indigo shares slump as thousands of flights are cancelled. Airline passengers in India faced massive disruptions starting last Friday as the country’s largest carrier cancelled thousands of flights due to a change in rules about pilots’ rest time. The airline said on Wednesday that operations had stabilized.
India’s central bank cuts policy rate to 5.25%: India’s central bank on Friday cut its policy rate by 25 basis points, in line with forecasts from economists, owing to “weakness in some key economic indicators.”
Quote of the week
The big question for India is really income growth and where that will come from. Next year we will need to have job growth and wage growth, and one of the positive is really this, finally, implementation of the labor code which passed in 2020 but finally implemented now.
In the markets
The Nifty 50 index was trading 0.5% higher on Thursday as of 1.40 p.m. local time, and has risen 9.4% year to date. The BSE Sensex was up 0.4% on Thursday, and has gained 8.4% this year so far.
The benchmark 10-year Indian government bond stood at 6.639%, down from a nine-month high of 6.663% on Wednesday.
— Lim Hui Jie
Coming up
Dec. 12: Consumer price index data for November; ICICI Prudential Asset Management Co IPO opens
Dec. 16: HSBC manufacturing flash PMI for December
Each weekday, CNBC’s “Inside India” news show gives you news and market commentary on the emerging powerhouse businesses, and the people behind its rise. Livestream the show on YouTube and catch highlights here.
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Source: CNBC