The active direct retail route—investors who trade at least once a month—was singed as 5 million investors exited the markets between September 2024 and August this year, per NSE data.

During this period, the unique investor count through the mutual fund route grew 12.5%, per data from Association of Mutual Funds in India (Amfi), suggesting a move towards relatively more patient investing amid the volatility.

However, market veterans said the falling direct retail trend would reverse once the market regains its mojo.

The number of active individual investors on the National Stock Exchange fell from a record 15.7 million in September 2024 to 10.7 million investors at the end of August this year. NSE accounts for 92.6% share of the equity cash segment.

The nearly 32% decline in the number of active individual investors coincided with the Nifty’s 17% plunge from its record high of 26,277.35 points on 27 September 2024 to a multi-month low of 21,743.65 on 7 April this year, before recovering to 24,427 points by 29 August, still 7% lower than its lifetime high.

On the other hand, unique mutual fund investor count based on Permanent Account Number (PAN) rose 12.5% to 56.39 million at the end of August from 50.12 million in September last year, per Amfi data.

Mint couldn’t get a segregation of retail investor growth from the mutual fund PAN-based count, which includes banks, companies, financial institutions, and high-networth individuals.

“Considering the past year’s relatively lackluster performance by headline indices and increased difficulty in spotting shorter term opportunities, the incentive for tactical participation has diminished significantly,” said Nirav Karkera, head of research at wealth tech platform Fisdom.

“However, with the turn of the cycle into a more secular rally, many investors may regain confidence for a tactical re-entry into stocks directly.”

Direct route vs mutual funds

Karkera believes investors wanting to participate in equities would prefer the mutual fund route to the direct route over time.

Swarup Mohanty, vice chairman and chief executive at Mirae Asset Investment Managers (India), has a different view: that direct trading will exceed investments through the MF route once a secular bull market rally gets underway.

“Investor behaviour is changing dramatically due to a shift in demographics where future young investors are likely to continue trading even if they face losses as they have higher risk- and loss-taking ability,” said Mohanty.

“This is already visible in the number of demat accounts outnumbering mutual fund folios now. When the market comes back to its bull phase, we will see more new traders coming back to the markets than the ones who have stopped,” he added.

Between September 2024 and August 2025, while the number of unique mutual fund investors increased 12.5%, the number of demat accounts grew almost 17% to 204.6 million, per depository data.

“In a rising market, booking profits seems simple. But in volatile times, even the best players can go wrong,” said Jimmy Patel, managing director, Quantum Mutual Fund, citing the exit of 5 million retail investors from the direct route over the past year.

“Many retail investors who entered during covid-19 with a trading mentality have now realised it’s not so easy to make quick money. That’s why systematic investment plans in mutual funds are gaining acceptance. Unlike trading, SIPs don’t require constant monitoring—they’re aligned to specific goals,” he said.

“Speculators learn that trading is seriously injurious to their financial health in a bear market,” added Nilesh Shah, managing director, Kotak Mahindra AMC. “Quick-money addiction unfortunately pushes them into speculation. After the losses, they realise the importance of regular and long-term investment and mostly become a SIP investor in equity mutual funds.”

Global tariff tensions spooked the markets after Donald Trump won the race to the US White House in November.

Also, net sales growth of Nifty 50 companies has been tepid—rising 6.2% on-year to ₹18.4 trillion in April-June, marking a fourth straight quarter of around 6% growth.

However, margin tailwinds and lower interest expenses, thanks to a 100 basis point cut in the repo rate this year, drove up aggregate profit after tax for the Nifty 50 companies by 14.8% on-year to ₹2.3 trillion—the strongest in five quarters.