Mutual funds close in on FPIs in Indian equity ownership
With Indian mutual funds now holding 11.7% of domestic equities, they have overtaken foreign portfolio investors, whose share has plunged below 14% since May 2021. This emerging trend showcases the increasing influence of local investors, particularly in Nifty 500 companies. Moving forward, any revival in foreign investment will likely depend on corporate earnings bouncing back and navigating…
Mumbai - Indian mutual funds are rapidly closing the gap with foreign portfolio investors (FPIs) in their ownership of domestic equities, according to data from NSDL. In September, mutual fund holdings reached a record 11.7% of Indian equities, just 230 basis points behind FPIs, who fell below the 14% mark. The FPI share has dropped from a May 2021 record of 20%, while mutual fund share has surged from 7% during the same period. In January, mutual funds held 11% of Indian equities.
Samir Arora, founder and fund manager at Helios Capital Management, noted that in every market, local investors typically dominate, and this trend is now evident in India. It appears reasonable to anticipate that, in the medium term, local institutional investors will hold a larger portion of the market than foreign investors.
Mutual funds' equity assets stood at around ₹55.14 lakh crore in September, more than doubling to around ₹40 lakh crore by January 2024 and surpassing ₹50 lakh crore in October 2025. Ritesh Jain, founder of Canada-based Pinetree Macro, suggested that over time, mutual funds, high-net-worth individuals, and family offices could collectively hold a larger share of the market.
The shift in ownership patterns is particularly noticeable among Nifty 500 companies, where domestic institutional investors (DIIs) have surpassed FPIs for the ninth consecutive quarter. DIIs now hold 21% of Nifty 500 companies, while FPIs hold 17%. This trend is also evident across several key sectors, including IT, FMCG, consumer services, realty, and financials. However, the FPI investment pattern change is not uniform, with increased holdings in capital goods, metals and mining, telecom, services, and healthcare.
Foreign investors, who traditionally had significant exposure to banks and IT companies, are now diversifying their investments beyond these sectors. The decline in FPI ownership has been observed across various sectors, but it has not been consistent across all. A recovery in corporate earnings could potentially attract foreign investors back to Indian equities, especially when Asian markets like Taiwan and Korea gain attention due to AI-focused investments.
If earnings grow at 14-15% annually and the currency depreciates by 2-3% annually, foreign investors could still achieve a return of around 12%.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
