Indian equity markets are witnessing a sharp structural shift in ownership patterns, with domestic mutual funds (DMFs) scaling new highs while foreign portfolio investor (FPI) participation continues to shrink. The latest data in NSE Market Pulse highlights a clear “domestication” of equity market risk, driven largely by sustained SIP inflows and persistent foreign outflows.
FPI ownership in NSE-listed companies fell to a 17-year low of 15.8% in the March 2026 quarter, down 90 basis points quarter-on-quarter, according to market data. The decline reflects continued selling pressure, with fiscal year 2026 witnessing record net outflows of $19.6 billion, of which nearly 72% occurred in the March quarter alone. In value terms, FPI holdings dropped 17.9% quarter-on-quarter to Rs 64.6 lakh crore as of March 31, 2026.
At the index level, the fall was even sharper, with FPI ownership in the Nifty 50 and Nifty 500 declining to 21.8% and 16.8% respectively, marking near 14-year and 17-year lows. The data underscores a sustained reduction in foreign exposure across Indian equities amid global risk repricing, dollar strength, and shifting capital flows toward other emerging markets and AI-linked opportunities.
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In contrast, domestic mutual fund ownership continued its upward trajectory, rising to a fresh record high of 11.4% in NSE-listed companies. This marks the eleventh consecutive quarter of record highs, supported by strong systematic investment plan (SIP) inflows and consistent retail participation. Domestic institutional investor (DII) ownership overall rose to 19.6%, remaining above FPI ownership for the sixth straight quarter, a reversal of historical trends last seen more than two decades ago.
The SIP engine remained the key driver of domestic flows. Average monthly SIP inflows rose to Rs 30,978 crore in the fourth quarter fiscal year 2026, up 3.3% quarter-on-quarter and 18.7% year-on-year, reflecting steady retail participation despite market volatility. For fiscal year 26, total mutual fund investments reached a record Rs 5.37 lakh crore, marking the fifth consecutive year of net inflows and the 20th straight quarter of positive flows.
Within the mutual fund universe, both active and passive ownership increased, with active funds rising more sharply to 9.3% and passive funds reaching a record 2.1%. This broad-based rise pushed DMF ownership in the Nifty 50 and Nifty 500 to 14.0% and 11.9% respectively, both at all-time highs.
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