Direct Mutual Fund Plans Surge as Fintechs Reshape AMC Landscape

• India’s asset management industry is evolving with a surge in direct mutual fund plans, now at 30 percent of equity AUM.
•  Younger investors and increased digital adoption are fueling this shift, especially in B30 cities.
• Despite growth, regular plans show stronger long-term investment discipline, keeping AMCs focused on balancing innovation with advisory strength.

India's asset management sector is experiencing a noteworthy transformation, spurred by the integration of fintech, increasing investor sophistication, and favorable regulatory changes. As of March 2025, direct mutual fund plans constitute 30 percent of equity assets under management (AUM), rising from 21 percent in 2020, indicating a distinct movement towards cost-effective, self-managed investing. This shift is fueled by platforms such as Groww and Zerodha, which offer commission-free investments along with easy digital onboarding processes.

Although corporations still represent 61 percent of direct AUM, there is a growing participation from retail investors, particularly through systematic investment plans (SIPs) favored by younger, tech-savvy individuals. Importantly, as of March 2024, 23.6 percent of direct SIP AUM originated from individuals aged 18 to 34. In tier-2 and tier-3 cities (B30), equity AUM experienced a growth rate of 37 percent CAGR from fiscal year 2020 to fiscal year 2025, driven by improved financial literacy and awareness promoted by AMFI-led educational initiatives.

The increasing financial empowerment of women and young people has also contributed to the rising adoption of direct plans. However, investment discipline appears to be more pronounced in regular plans, with 21.2 percent of AUM maintained for over five years, compared to just 7.7 percent in direct plans. Asset Management Companies (AMCs) are responding by enhancing their digital platforms and moving towards commission structures based on trails, while distributor-centric models continue to face challenges but still hold significance in B30 regions. Analysts indicate that the AMC industry is set for enduring growth, propelled by scalable business models, strong branding efforts, and a focus on aligning with India's financialization progress. Summarize this in a 3 lines short sentences