The allure of diversification seems to be growing as Indian households are significantly increasing their exposure to the stock market, with mutual funds emerging as one of the highly opted savings instrument.

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One in every three rupees of household wealth now allocated to equities, either directly or indirectly, according to a report by Emkay Global.  

The report highlights that Indian households have nearly doubled their equity exposure to 30.6% in the first half of fiscal 2025 from roughly 17.2% in fiscal 2016. Direct equity exposure rose to around 14.6% from 8.5% during the same period.

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In the first half of fiscal 2025, household financial savings directed towards direct equities and mutual funds stood at 15% and 12%, respectively, compared to 8% and 6% in fiscal 2016. Meanwhile, the share of savings allocated to insurance and bank deposits has declined from 56% and 23% in fiscal 2016 to 41% and 20% in fiscal 2025.

Further backing this, SBI Research found in its study that among financial savings, the share of bank deposits and currency is declining as new avenues of investment like mutual funds are gaining investor interest. 

Household financial savings are now distributed across deposits (41%), insurance (20%), direct equity (15%), mutual funds (12%), EPFO (8%), and NPS (4%). Emkay expects this trend to continue, driven by factors such as lower fixed-income yields, deeper equity product distribution, and increased online broking participation.