Structural Shifts in Distribution and Investor Behaviour-MF Industry

The Indian Mutual Fund industry continues to be a remarkable case study of financial deepening and evolving investor maturity. Over the past two financial years, it has not only witnessed an impressive expansion in Net Sales but also undergone significant shifts in distribution dynamics and investor channels. Yes, the channels have multiplied, and the flow of investments has also grown. During the era of UPA-II -II the term called financial inclusion was humming in the air and has now taken on a full shape in terms of penetration in the Indian economy. Investments are not restricted to a small segment and are not ruled by the FII's. In my 20s years of my career and on November 4th, it will be 21 years, the Mutual fund industry has witnessed dramatic changes where not only investors have changed but the governance rules and regulations too have changed. The last 5 years for the Indian financial market have been a huge boon and full of dramatic changes forever for investments and investors.

A Year of Explosive Growth

Net Sales in the Mutual Fund industry more than doubled, surging from ₹2,10,000 crore in FY24 to ₹4,72,628 crore in FY25. However, when adjusted for the Systematic Investment Plan (SIP) book—representing long-term retail discipline—Actual Net Sales stood at ₹2,25,433 crore in FY25, up sharply from ₹39,000 crore in FY24. This leap underscores the strong growth momentum and rising participation beyond traditional SIP inflows, driven by investor confidence, favourable market performance, and expanding distribution networks.

FY26: Moderation After the Boom

As of September 2025, Net Sales in FY26 have reached approximately ₹79,000 crore, supported by steady inflows over the past three months since July. Yet, the pace has moderated. The average monthly run rate has eased from ₹19,000 crore in FY25 to around ₹13,000 crore in FY26—a decline of roughly 30%. This moderation likely reflects profit-booking, near-term market volatility, and a normalisation after an exuberant FY25.

FY25: The Distribution Landscape

FY25 was a defining year in terms of how investors accessed mutual funds:

• Direct Channel (30%) emerged as the single largest contributor to Actual Net Sales, signalling a clear behavioural shift toward self-directed investing. The surge in digital literacy, investor awareness campaigns, and online MF platforms has empowered individuals to manage their portfolios more actively.

• Private Banks + Private Wealth + RIA (19%) formed the second-largest segment, underlining the growing influence of the affluent client base and professional advisory networks.

• PSU Banks (8%) lagged behind, constrained by limited distribution reach and digital agility compared to private counterparts.

• IFA (Independent Financial Advisors) + National Distributors (31%) together continued to play a pivotal role, though their share reflects an evolving equilibrium as investors explore alternative advisory channels.

• RIA-Fintech + Retail (13%)—though still emerging—showed steady progress, driven by innovative fintech platforms, app-based investing, and digital-first investor onboarding.

FY26 (Till September): The Structural Shifts Accelerate

The early trends of FY26 indicate continued transformation across segments:

• Direct Channel strengthened further to 31%, reaffirming investor confidence in self-managed investing and hinting at the rise of personalised “family office” setups among affluent retail investors.

• Private Banks + Private Wealth + RIA surged to 24%, possibly buoyed by New Fund Offer (NFO) activity and renewed advisory focus on diversified portfolios.

• IFA Segment declined to 17%, suggesting consolidation within the traditional distributor ecosystem and possible migration of clients toward digital or hybrid models.

• RIA-Fintech + Retail nearly doubled to 29%, a remarkable jump that reflects the rapid adoption of fintech platforms, tech-enabled advisory, and strong investor appetite for new-age products.

• PSU Banks turned negative, potentially impacted by redemptions and shrinking new flows amid competitive pressures and limited investor engagement.

Conclusion: The Dawn of a Digital-Advisory Era

The Indian Mutual Fund industry is entering a new phase—characterised by democratisation, digital empowerment, and diversified investor behaviour. FY25 was about scale and participation; FY26 is shaping up to be about sustainability, channel evolution, and investor sophistication.

The rise of direct and fintech-led participation signals a structural rebalancing—where accessibility and technology are redefining the future of investment distribution. The next frontier will likely revolve around integrating human advisory depth with digital efficiency—a blend that could define the next decade of India’s wealth creation journey.