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India’s capital market infrastructure - the often unseen backbone of Dalal Street has quietly turned into a Rs 700 billion revenue engine in FY25, riding on record trading volumes, a flood of new investors and the growing financialisation of household savings. A new report by global brokerage Jefferies shows that brokers, stock exchanges, depositories and registry and transfer agents (RTAs) are no longer just support players but central to the market’s growth story. With mutual fund assets swelling, demat accounts multiplying and younger investors leading the charge, the sector is set for another strong run in the years ahead.

According to Jefferies, India’s capital market infrastructure players together generated revenues of over Rs 700 billion in FY25. The surge was driven largely by higher market activity and a steady rise in investor participation across equity, derivatives and mutual funds.

Brokers remained the biggest contributors, accounting for nearly Rs 500 billion of the total revenue, while stock exchanges added around Rs 200 billion. Depositories and RTAs made up the rest, benefiting from the sharp rise in demat accounts and folios.

One of the biggest growth engines is the mutual fund industry. Jefferies projects mutual fund assets under management (AUM) to grow at a 16 per cent compound annual rate between FY26 and FY28.

That would take industry AUM from Rs 67 trillion in FY25 to Rs 103 trillion by FY28, underlining the shift of household savings from physical assets to financial products. The rise in systematic investment plans (SIPs) and deeper retail participation are expected to keep inflows steady even during volatile phases.

The report expects cash market average daily turnover (ADTO) to grow at 15 per cent, while futures and options (F&O) premium ADTO is projected to rise 12 per cent over the coming years. This reflects some moderation in derivatives activity after recent regulatory curbs, but overall volumes are still seen expanding as market depth improves and more participants enter. For exchanges, growth will increasingly come from index options, which are estimated to account for nearly 35 per cent of the options market by FY28.

India’s investor base continues to widen at a rapid pace. Jefferies expects the number of demat accounts to rise from 192 million in FY25 to 304 million by FY28. At the same time, mutual fund folios are projected to jump from 235 million to 377 million over the same period, reflecting not just new investors but also deeper engagement from existing ones. This expanding base directly benefits depositories and RTAs, which earn from account maintenance, transaction processing and record-keeping.

Brokers are no longer relying only on equity brokerage for growth. The report says their next phase will be driven by expansion into adjacent products such as margin trading facilities, commodities, bonds and wealth management. With clients looking for one-stop financial platforms, full-service offerings are becoming a key differentiator in a crowded market. Jefferies expects brokers and exchanges to grow faster than other infrastructure segments over the next few years.

A striking trend highlighted in the report is the growing role of younger investors. Those below 30 years now make up about 40 per cent of the investor base in FY25. Their participation is seen as a structural shift that could keep volumes elevated over the long term.

Analysts at Jefferies also point to near-term market cues. A sharp reversal in the rupee and renewed foreign institutional investor (FII) buying in the cash market could accelerate a year-end rally. Such moves often trigger short covering, which can push benchmark indices higher and, in turn, lift trading activity across the ecosystem.

The capital market infrastructure may not grab headlines like big stocks or IPOs, but it is where the money flows first. As more Indians invest, trade and save through markets, this sector stands to gain steadily from scale, diversification and operating leverage. If current trends hold, FY25’s Rs 700 billion may just be the base for a much larger opportunity ahead.