The Securities and Exchange Board of India's latest investor survey has uncovered a striking disparity between market awareness and actual investment participation among Indian households. The comprehensive study reveals that while a majority of households possess knowledge about securities market products, the translation of this awareness into active investment remains significantly limited.

Key Survey Findings

The SEBI Investor Survey 2025 presents compelling data about household engagement with India's securities market:

The survey findings indicate that approximately 63% of Indian households demonstrate awareness of at least one securities market product. However, this awareness translates into actual investment activity for only 9.5% of households, creating a substantial gap of over 53 percentage points.

Investment Scope and Products

The survey encompasses various securities market instruments that households may invest in, including:

• Equities and stocks
• Mutual funds
• Bonds and fixed-income securities
• Other market-linked investment instruments

Despite widespread awareness of these investment options, the low participation rate of 9.5% suggests significant barriers exist between knowledge and action in investment decision-making.

Market Participation Challenges

The substantial difference between awareness levels and actual investment participation highlights the complexities involved in converting market knowledge into investment behavior. The survey results suggest that while educational efforts about securities market products have achieved considerable reach, additional factors may be influencing households' decisions to actively participate in market investments.

The findings provide valuable insights for policymakers, market intermediaries, and financial institutions working to enhance retail investor participation in India's securities market. Understanding this awareness-to-action gap becomes crucial for developing targeted strategies to encourage broader market participation among Indian households.

SEBI is implementing stricter oversight on New Fund Offers (NFOs), particularly targeting thematic and sectoral mutual funds that demonstrate significant portfolio overlap with existing schemes. The regulator is enforcing these measures even before finalizing official regulations, creating immediate impact on asset management companies' NFO strategies.

Portfolio Overlap Framework and Current Implementation

SEBI released a consultation paper on July 18 proposing that mutual funds should not allow more than 50% of stocks in sectoral or thematic schemes to overlap with stocks in other equity schemes from the same AMC. Large-cap schemes remain exempt from this restriction.

Despite the rules not being officially finalized, SEBI is already enforcing these guidelines during the NFO approval process. When AMCs submit new thematic NFO applications, SEBI requests model portfolios and conducts detailed overlap analysis with existing equity funds. Cases showing excessive overlap require AMCs to provide justification for the new fund launch.

Market Data Reveals Concentration in Thematic Launches

AMFI data demonstrates the scale of thematic fund proliferation in the mutual fund industry:

The data reveals that thematic and sectoral fund launches significantly outnumber new offerings across all other equity categories combined. Analysis shows three out of five thematic schemes exhibit more than 50% overlap with another scheme within their respective fund houses.

Value and Contra Fund Overlap Monitoring

SEBI proposes allowing AMCs to manage both value and contra funds under specific conditions:

Impact on Asset Management Companies

The enhanced oversight creates several operational challenges for AMCs:

• Extended Approval Timelines: Portfolio overlap analysis adds complexity to the NFO approval process
• Strategic Restructuring: AMCs must demonstrate clear differentiation between proposed and existing schemes
• Reduced Launch Frequency: Stricter scrutiny may result in fewer successful NFO approvals
• AUM Growth Constraints: Traditional growth strategies through similar thematic funds face regulatory barriers

Regulatory Rationale and Market Structure

SEBI's concerns stem from the current regulatory framework that restricts mutual fund houses to one scheme per category, while exempting sectoral and thematic funds from this limitation. This exemption has led to concentrated activity in thematic fund launches, often resulting in portfolio duplication under different scheme names.

The regulator aims to address investor confusion caused by multiple funds with similar portfolios but different marketing themes. The overlap restrictions seek to ensure genuine diversification and meaningful choice for investors while maintaining market integrity.

Implementation Timeline and Monitoring

While the consultation paper remains under review, SEBI's immediate enforcement demonstrates regulatory commitment to addressing portfolio overlap issues. The proposed monitoring framework includes regular portfolio comparisons and structured correction mechanisms to ensure ongoing compliance with overlap limitations.