Despite expanding assets and increasing investor base, India’s mutual fund industry experienced a sharp decline in returns in FY26, with an alarming rise in loss-making schemes driven by market volatility and subdued performance.
India’s mutual fund industry kept expanding through FY26, but its return profile weakened sharply as market turbulence weighed on performance. According to the Securities and Exchange Board of India’s latest annual report, the number of schemes posting annual losses nearly tripled to 731 from 243 a year earlier, while the count delivering returns above 10% fell to 198 from 304.
The deterioration was widespread. Schemes finishing the year with losses of up to 5% climbed to 492 from 172, those down 5% to 10% increased to 146 from 41 and funds falling 10% or more rose to 93 from 30. By contrast, the number of schemes with gains of 5% to 10% slipped to 539 from 852, while those returning between zero and 5% rose to 373 from 218. SEBI attributed the softer spread of returns to a more subdued market backdrop and heightened volatility.
Even so, the industry continued to gain scale. Assets under management rose 12.2% to ₹73.7 lakh crore at the end of March 2026 from ₹65.7 lakh crore a year earlier, while equity-oriented schemes drew net inflows of ₹3.5 lakh crore. Flexi-cap funds led the pack, followed by small-cap and mid-cap schemes, underscoring the persistence of retail appetite for equity exposure despite uneven fund-level results. Industry reports also noted that the sector’s asset base reached about $790 billion, reflecting another year of robust participation.
Investor participation broadened as well. The number of unique mutual fund investors climbed 13.2% to 6.1 crore, with Tier-II cities recording the fastest growth and Tier-III centres remaining the largest investor base. Systematic investment plan activity also strengthened, with contributing SIP accounts rising to 10.45 crore and average monthly net SIP inflows increasing to ₹16,413 crore. At the same time, overall net inflows into mutual funds eased 9.7% to ₹7.4 lakh crore as redemptions rose faster than fresh mobilisation, even as eight new asset management companies entered the market.
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