Listed firms' investments in mutual funds touch record ₹3.8 trillion

Cash buildup, limited capex appetite push firms towards fund houses

Listed companies have deployed more money in mutual funds (MFs) than at any time on record. 

Their MF investments touched ₹3.8 trillion in 2024-25 (FY25), according to data from the Centre for Monitoring Indian Economy (CMIE). This is the highest in data going back to 1990-91. The analysis looked at 1,569 non-finance companies with available data for FY25. The record high is despite it being a partial sample. The full sample for the previous year had 3,867 companies.

Uncertainty, limited growth avenues, and lower interest rates are said to have been factors contributing to the increase. 

The value of MF investments last hit a high in 2020-21 when it touched ₹3.6 trillion. The numbers were lower in subsequent years before hitting a new high in FY25. 

 

Many companies are generating large amounts of cash at a time when there may not necessarily be many business avenues for large capital allocation, observed Trust MF Chief Executive Officer Sandeep Bagla. The resultant surplus may be finding its way into alternative avenues. 

“Companies are not seeing the kind of growth opportunities where they can do unbridled capex (capital expenditure),” he said.

Non-finance company cash balances are at a record ₹7.4 trillion despite the limited sample. This is more than twice the ₹3.4 trillion seen before the pandemic. Capacity utilisation was at 75.5 per cent as of March 2025 after adjusting for seasonal variations, according to the Reserve Bank of India’s Order Books, Inventories and Capacity Utilisation Survey. Companies may not invest in creating new capacity, for example by building new factories, when existing production capacity remains significantly unutilised. 

 

Surplus cash driving increased investments is also borne out by looking at MF investments as a percentage of total assets, which was at 3.2 per cent in FY25. This is in line with previous years, shows data over the past two decades. The peak was 4.3 per cent in 2016-17, when demonetisation happened. 

Most of the money is likely to be deployed in fixed income rather than equity since companies have a mandate to preserve capital rather than chase returns, said Bagla.  

Lower prevailing interest rates for bank deposits may also be a factor in money flowing into MFs. Even if the continued uncertainty over tariffs eases, companies may hold back on capex until they see strong growth returning in the economy. Meanwhile, money may find its way into MFs on an ongoing basis, according to Bagla. 

“I think it will continue for some time,” he said. 

Overall corporate investments in MFs are larger since they include companies beyond the 1,569 entities in this sample. Data from the Association of Mutual Funds in India show corporate investments including unlisted companies and financial firms as well. It may also reflect corporate entities structured as investment holding companies. The sum total of their investments in FY25 was ₹23.6 trillion. It was ₹9.6 trillion at the end of 2018-19. Equity funds have seen corporate investments rise 129 per cent to ₹5.4 trillion between FY19 and FY25. Non-equity allocations are up 152 per cent in the same period to ₹18.2 trillion. Non-equity assets were at ₹10.6 trillion in 2023-24.  

Lower rates in banks can be a factor for switching to MFs, which often offer slightly higher returns. Scheduled commercial banks were offering fresh deposits at 5.61 per cent in July, the lowest in 33 months, shows weighted average domestic deposit rates data from CMIE.