Zerodha’s Move Into A ₹68 Lakh Cr Industry | Vishal Jain On Expanding India’s 8% Investor Base
Mar 7, 2025
auto_awesome
Vishal Jain, CEO of Zerodha Fund House, brings over 20 years of experience in India's financial markets. He discusses the evolution of mutual funds since the 1960s and highlights the pivotal role of index funds and ETFs in retail investing. Jain reveals why two-thirds of retail investors remain hesitant and underscores the importance of demystifying investments. He also shares his philosophy rooted in India's growth narrative and the cultural significance of gold as a hedge. Can passive investing truly dominate the market? Tune in to discover!
Zerodha's expansion into India's mutual fund industry signifies a shift towards passive investing, aiming to increase accessibility for diverse investors.
The transformation of retail investing in India is bolstered by technology and SIPs, yet cultural preferences still hinder broader participation in financial products.
Deep dives
Growth of Mutual Funds in India
The mutual fund industry in India has experienced significant evolution since its inception, transitioning through various phases since the 1960s. Initially dominated by a single entity, the Unit Trust of India, the landscape changed in the 1990s with the entrance of public sector banks and international players, leading to the establishment of around 45 mutual funds today. Currently, there are approximately 5 crore unique investors engaging with mutual funds, managing assets of about 67 to 68 lakh crores, showcasing the sector's growth despite historical hesitance among Indian investors towards investment products beyond traditional options like fixed deposits and gold. The rise of systematic investment plans (SIPs) since the mid-2000s has proven pivotal, as small, regular investments have become popular, fostering confidence in equity investments.
The Role of Technology and Online Platforms
Technological advancements have revolutionized the accessibility and transparency of the stock market for retail investors in India. The introduction of electronic trading, which began in the mid-90s with the National Stock Exchange, has made trading more transparent and user-friendly compared to the previous opaque methods. Digital initiatives such as Jandhan accounts, UPI, and streamlined e-KYC processes have significantly lowered barriers to entry for potential investors, particularly in tier two and three cities. The emergence of online trading and the recent surge in Demat accounts have also led to increased retail participation in mutual funds and ETFs, particularly following the market volatility due to the COVID-19 pandemic.
Changing Investment Patterns Among Indian Consumers
Investment behavior in India is gradually shifting, with younger generations showing a growing interest in financial products beyond traditional assets like physical gold and real estate. While gold ETFs represent a more efficient investment option, cultural preferences still strongly favor physical gold, indicating a need for better financial education. Furthermore, the participation of women in mutual funds remains low at approximately 21%, emphasizing the need for targeted outreach to improve financial literacy among underrepresented demographics. This shift is further driven by the recognition of the potential returns from mutual funds, with an estimated one crore new mutual fund investors emerging each year.
Future of Mutual Funds and Economic Growth in India
The outlook for mutual fund participation in India is optimistic, particularly with predictions of significant growth over the next couple of decades as the economy expands. Current ratios of assets under management in relation to India's GDP suggest room for growth, potentially achieving a one-to-one ratio in the future similar to developed markets. The increasing focus on digital solutions and educational efforts is expected to lead to a substantial increase in the number of Americans engaging with financial products, especially mutual funds. As trust in these products grows and financial education improves, it is anticipated that we will witness a surge in investors leveraging these tools to meet their financial objectives.
In this episode, we have Vishal Jain, CEO of Zerodha Fund House, who brings over two decades of experience in building ETFs and passive investment products.
From launching India’s first-ever ETF with Benchmark AMC in 2001 to now leading the country’s first passive-only AMC, Vishal has contributed through various roles to India's financial markets.
We break down: - The history of mutual funds in India from the 1960s to today’s ₹68 Lakh Cr AUM industry. - Why index funds & ETFs are transforming retail investing. - How retail participation is growing (but why 2/3rd of investors still hesitate). - Vishal's investing philosophy is rooted in a belief in India's growth story, beyond the obvious goal to beat inflation. - The role of gold as a portfolio hedge, even for those bullish on India. - Zerodha Fund House’s vision—Can passive investing truly take over?
If you're curious about where India's investment space is headed and how you can position yourself wisely, this episode is a must-watch!
2:10 - History of mutual funds in India 7:09 - Exchange-traded funds 10:13 - Employee Provident Fund in ETFs 11:01 - Why COVID increased trading activity? 12:36 - Is now a good time to invest? 14:02 - How Vishal builds his portfolio 16:18 - Trends in India’s mutual fund adoption 17:44 - Why only 1/3rd of retail investors buy mutual funds? 21:36 - Can investment markets learn from OTT growth? 22:52 - Does India need more mutual fund providers? 23:51 - Is India’s growth limited to the top 1%? 27:06 - Can you buy mutual funds w/o a demat account? 28:07 - Physical gold vs. gold ETFs 29:34 - Who’s buying mutual funds? 33:11 - What’s driving usage of financial products? 34:26 - AI’s role in customer acquisition 36:40 - What’s Zerodha Fund building? 38:32 - Risk & return across asset classes 40:12 - Is Vishal bullish on India’s future? --- Hi, I am your host Siddhartha! I have been an entrepreneur from 2012-2017 building two products AddoDoc and Babygogo. After selling my company to SHEROES, I and my partner Nansi decided to start up again. But we felt unequipped in our skillset in 2018 to build a large company. We had known 0-1 journeys from our startups but lacked the experience of building 1-10 journeys.
Hence was born The Neon Show (Earlier 100x Entrepreneur) to learn from founders and investors, the mindset to scale yourself and your company. This quest still keeps us excited even after 5 years and doing 200+ episodes.
We welcome you to our journey to understand what goes behind building a super successful company. Every episode is done with a very selfish motive, that I and Nansi should come out as a better entrepreneur and professional after absorbing the learnings. --- Check us out on: Website: https://neon.fund/ Instagram: https://www.instagram.com/theneonshoww/ LinkedIn: https://www.linkedin.com/company/beneon/ Twitter: https://x.com/TheNeonShoww
Connect with Siddhartha on: LinkedIn: https://www.linkedin.com/in/siddharthaahluwalia/ Twitter: https://x.com/siddharthaa7 ------------- This video is for informational purposes only. The views expressed are those of the individuals quoted and do not constitute professional advice.
