India's Mutual Fund revolution: direct plans surge as young investors take charge

India’s asset management industry is undergoing a structural transformation, driven by rising investor maturity, fintech adoption, and regulatory reforms. With assets under management (AUM) in direct mutual fund plans growing steadily, the sector is witnessing a democratisation of investment, spearheaded by younger, digital-first investors. This evolving landscape presents a compelling opportunity from an investment perspective.

As of March 2025, direct plans account for 30% of the mutual fund industry's equity AUM—up from 21% in March 2020—signalling a strong shift towards low-cost, self-directed investing.

This transition has been accelerated by the rise of fintech platforms like Groww and Zerodha, which offer commission-free investment options with easy digital onboarding. While corporates continue to dominate direct AUM at 61%, retail participation is gaining traction, particularly through systematic investment plans (SIPs).

In fact, the share of direct SIP AUM among individuals aged 18–34 rose to 23.6% in March 2024, highlighting the changing investor profile. The deeper penetration of mutual funds into India’s B30 (beyond top-30) cities has emerged as a powerful growth catalyst.

B30 equity AUM clocked a 37% CAGR from FY20 to FY25, aided by increased financial awareness, digital adoption, and AMFI’s investor education initiatives. Direct plans’ share in B30 cities has also surged, supported by the growing financial independence of women and young investors.

However, despite the rapid rise of direct plans, regular plans still exhibit better investment discipline. Only 7.7% of direct plan AUM was held for over five years, compared to 21.2% in regular plans. This highlights the enduring value of professional guidance, especially for retail investors prone to reactive investment behaviour.

From an investment standpoint, AMCs are adapting swiftly. Market-leading AMCs are enhancing their digital platforms and shifting toward trail-based commission structures, positioning them well to capture value from both self-directed and advisor-led segments, balancing innovation with advisory strength.

On the other hand, distributor-led models face headwinds, although their deep B30 presence and digital evolution offer some resilience. Overall, the AMC sector stands at the cusp of a long-term growth cycle, benefiting from higher retail participation, direct plan adoption, and structural shifts in savings behaviour.

Investors may consider this sector for its scalable business models, strong brand franchises, and alignment with India’s long-term financialization theme.

HDFC AMC: Buy| Target Rs 5,000| LTP Rs 4,783| Upside 4%


HDFC AMC demonstrated robust financial performance in 4QFY25, with operating revenue surging 30% YoY to INR 9 billion. EBITDA climbed 35% YoY to INR 7.3 billion, and PAT rose 18% YoY to INR 6.4 billion, boosted by higher other income. The company maintained strong 81% EBITDA margins. For FY25, PAT increased 26% YoY to INR 24.6 billion, despite a slight dip in SIP flows.

With an improved market position, a well-diversified product portfolio, and digital expansion efforts, HDFC AMC is well-positioned to sustain growth and deliver value to its stakeholders. For FY26/FY27, we expect 12%/18% growth in equity AUM and 13%/16% growth in total AUM.

Nippon Life India AMC: Buy| Target Rs 750| LTP Rs 720| Upside 4%


NAM reported 21% YoY revenue growth to INR 5.7b in 4QFY25, with PAT at INR 3b (10% beat, -13% YoY) aided by tax reversals and strong other income. Market share in QAAUM rose to ~8.3%, with equity share at ~6.9%. NAM retains ETF leadership and is diversifying to sustain SIP growth amid volatility.

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A new Japan scheme enhances global access to Indian markets. Despite expected moderation in equity yields, strong net flows will cushion overall yield pressure. Continued product innovation, improved fund performance, and rising passive share support our Buy rating, positioning NAM well for sustained long-term growth.

(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd.)

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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)