New Delhi [India], August 9 (ANI): Retail participation in India's financial markets is likely to deepen further as rising financial literacy, digital access and regulatory reforms continue to shift household savings towards market-linked instruments, according to the Securities and Exchange Board of India's (SEBI) Annual Report 2025-26.

The regulator's latest data points to continued expansion in mutual funds, SIPs and other professionally managed investment products, while stronger investor-protection measures are expected to support broader participation.

India's financial landscape is undergoing a structural transformation, with investors increasingly favouring financial assets over traditional instruments, the report said.

Mutual funds remain central to this transition, supported by digital onboarding and growing accessibility of systematic investment plans (SIPs). SEBI said the mutual fund industry's total assets under management more than doubled over the past five years, rising from Rs 31.43 lakh crore in March 2021 to Rs 73.7 lakh crore by March 2026.

The number of unique mutual fund investors rose 13.2 per cent year-on-year to 6.1 crore in 2025-26. Importantly, the expansion is increasingly broad-based, with Tier III cities accounting for 55 per cent of the investor base, indicating deeper penetration beyond major urban centres. SIPs also strengthened their role as a vehicle for disciplined, long-term investing, with gross inflows rising 20.8 per cent during the year.

SIP accounts increased to 1,045 lakh in 2025-26 from 1,005 lakh a year earlier, while assets accumulated through SIPs rose to Rs 15.1 lakh crore from Rs 13.35 lakh crore. Gross SIP inflows climbed to Rs 3.5 lakh crore, while net inflows increased to Rs 1.97 lakh crore.

The broader mutual fund industry also recorded strong growth, with AUM rising 12.2 per cent to Rs 73.7 lakh crore. Equity-oriented schemes attracted net inflows of Rs 3.5 lakh crore, while passive investment continued to gain traction. Net inflows into passive schemes rose to Rs 2.1 lakh crore from Rs 1.4 lakh crore in 2024-25.

At the same time, SEBI is tightening safeguards as participation expands. Stress tests showed that large small-cap schemes could require substantially longer periods to liquidate portfolios under high redemption pressure, highlighting liquidity and concentration risks.

Going ahead, the combination of digital access, rising investor awareness and regulatory simplification could support sustained growth in financial-market participation. SEBI's revised mutual fund regulations are aimed at improving clarity while retaining and strengthening investor-protection, transparency and governance standards. (ANI)