India’s mutual fund industry continued its strong growth trend in December 2025, driven by expanding participation in passive investment strategies. According to Franklin Templeton India Mutual Fund, passive fund AUM rose significantly over the past year, supported by both equity‑focused passive schemes and wider investor adoption.
The broader industry also saw increased traction outside major metropolitan centres, with smaller cities contributing meaningfully to overall AUM. The distribution of assets across equity, debt and hybrid categories highlighted evolving investor preferences and category‑specific flows during the year.
Passive fund AUM reached ₹14.20 lakh crore in December 2025, marking a 31% increase from ₹10.85 lakh crore in December 2024. The share of passive funds in total AUM increased steadily from 12% in December 2021 to 18% in December 2025, signalling sustained investor preference for low‑cost index‑linked strategies.
Equity passives accounted for about 69% of the overall passive corpus, emphasising their dominance within the passive segment. Meanwhile, debt passives saw a slight decline as their share dipped from 11% in December 2024 to 10% in December 2025.
Overall industry AUM stood at ₹80.23 lakh crore at the end of December 2025, supported by net inflows across key categories. Flexi‑cap funds recorded the highest net sales over the previous 12 months at ₹80,979 crore, followed by small‑cap funds at ₹52,321 crore.
Mid‑cap and large & mid‑cap funds also performed well, attracting ₹49,939 crore and ₹42,176 crore, respectively. Arbitrage funds posted strong activity with net sales of ₹72,318 crore, demonstrating sustained interest in low‑volatility products.
Debt funds experienced varied flows during December 2025 as quarter‑end adjustments influenced investor allocations. Money market funds reported inflows of ₹66,994 crore, reflecting short‑term liquidity preferences among investors.
Low‑duration funds and corporate bond funds attracted ₹23,339 crore and ₹21,380 crore, respectively, highlighting demand for shorter maturity and high‑quality instruments. In contrast, gilt funds saw outflows of ₹5,680 crore, as investors rebalanced portfolios following earlier gains.
Mutual fund adoption continued rising beyond India’s top urban centres, with smaller cities contributing increasingly to industry growth. AUM from B15 cities rose from 26% in September 2020 to 35% in September 2025, indicating deepening penetration.
B30 cities outpaced major metros over the past year and now account for 18% of the industry’s total AUM. Among states and cities, Maharashtra led contributions, followed by Delhi, Karnataka and Gujarat, while Hyderabad recorded the highest AUM addition in the past 12 months.
India’s mutual fund industry closed December 2025 with strong growth in passive AUM, expanding retail participation and category‑specific inflows. Equity‑oriented passive strategies continued to dominate, while debt categories recorded mixed flows influenced by quarterly adjustments.
The industry’s expanding reach in B15 and B30 cities reflects a broadening investor base and deepening financial inclusion. With more than ₹80 lakh crore in total AUM and rising penetration across regions, India’s MF industry remains on a strong growth trajectory.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Jan 22, 2026, 4:57 PM IST
Akshay Shivalkar
Akshay Shivalkar is a financial content specialist who strategises and creates SEO-optimised content on the stock market, mutual funds, and other investment products. With experience in fintech and mutual funds, he simplifies complex financial concepts to help investors make informed decisions through his writing.
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