Strong Local Flows into Funds Offset Volatile Overseas Money
Key Insights in Mutual Funds and Domestic Investment Trends
– The share of equity and mutual funds in annual household financial savings surged to over 15.2% in FY25, a significant rise from approximately 2% in FY12.
– According to the Economic Survey, mutual funds have played a pivotal role in stabilizing the impact of fluctuating overseas capital inflows, highlighting the increasing influence of domestic investors on India’s growth trajectory.
Domestic Institutional Investors (DIIs) Lead the Charge
– Domestic institutional investors, particularly mutual funds and insurance companies, have consistently emerged as net buyers of equities, even amid significant sell-offs by foreign portfolio investors (FPIs).
– During April to December 2025, FPIs experienced six months of net outflows, contrasted with several months of considerable inflows, predominantly influenced by global financial conditions.
Mutual Funds: The Vanguard of Change
– Mutual funds have become increasingly influential in the Mumbai stock market, with their holdings reaching a record 10.9% by value in the September quarter, thanks largely to consistent inflows through systematic investment plans (SIPs).
– For the first time in the March 2025 quarter, DIIs surpassed FPIs in terms of value holdings. This trend continued into FY26, with DII holdings rising to an unprecedented 18.3% in the September 2025 quarter, while FPI holdings dropped to a 13-year low of 16.7%.
– The combined share of DIIs, retail investors, and high-net-worth individuals (HNWIs) climbed to a historic high of 27.8% in the September quarter.
Primary Markets Show Resilience
– In the current fiscal year up to December 2025, IPO volumes increased by 20% compared to FY25, with funds raised also growing by 10%.
– Mainboard IPOs surged from 69 to 94, generating ₹1,60,273 crore, while offers for sale (OFS) accounted for 58% of total proceeds. Similarly, SME listings rose to 217, raising ₹9,635 crore during the same period.
Conclusion: The Bright Future of Domestic Investment
In conclusion, the robust performance of mutual funds demonstrates the essential role domestic flows play in stabilizing the market against external volatility. The growing share of equity and mutual funds in household savings reflects a broader trend of empowerment among Indian investors, signaling a promising future for the country’s financial landscape. With DIIs leading the charge, the Indian equity market is poised for growth, showcasing the strength of national investment habits.