Household savings shift towards markets as stocks, mutual funds close gap with provident funds

Indian households nearly doubled their savings in shares, debentures and mutual funds in 2024-25 from the previous year, signalling a significant shift towards market-linked financial assets.

Savings in these instruments are also closing the gap with provident and pension funds, which have traditionally been a much larger part of household financial savings in the country.

Household savings in shares and debentures rose 93 percent to Rs 6.91 lakh crore in 2024-25 from Rs 3.59 lakh crore in the previous year. The surge was driven largely by mutual funds. Household savings routed into them jumped nearly 80 percent to Rs 5.13 lakh crore from Rs 2.85 lakh crore in the previous fiscal year.

The shift reflects the growing appeal of market-linked investments such as mutual funds, which can offer higher returns than traditional savings products such as fixed deposits, as well as wider awareness of mutual funds through initiatives such as the industry’s Mutual Funds Sahi Hai campaign.

The numbers show how quickly the trend has gathered pace, even as market returns have been subdued lately. The benchmark Nifty index has declined 1.72 percent over the past two years, yet household savings in shares and debentures have more than doubled from Rs 2.60 lakh crore in 2022-23. Mutual fund investments have also more than tripled from Rs 1.67 lakh crore over the same period.

Household balance sheets also strengthened as financial liabilities declined to Rs 15.74 lakh crore from Rs 19.09 lakh crore. As a result, net household financial savings jumped about 33 percent to Rs 22.58 lakh crore from Rs 16.93 lakh crore.

The shift towards financial assets was part of a broader increase in household savings. Total savings, including physical assets and gold and silver ornaments, rose to Rs 68.47 lakh crore in 2024-25 from Rs 58.90 lakh crore a year earlier.

Physical assets continued to dominate at Rs 43.71 lakh crore, while savings in gold and silver ornaments increased to Rs 2.18 lakh crore.