Strong local flows into funds offset volatile overseas money

Mumbai: Mutual funds, pooling together a slice of savings by millions of ordinary Indians, have helped offset the impact of volatile flows into local equities from overseas money managers, the Economic Survey said, underscoring the increasing role of domestic investors in powering the growth story of the world's fastest-expanding major economy.

The Survey notes that domestic institutional investors (DII), particularly mutual funds and insurance companies, have remained consistent net buyers of equities even during phases of heavy selling by foreign portfolio investors (FPI). Driven largely by global financial conditions rather than domestic macroeconomic factors, FPIs recorded six months of net outflows and three months of sizable inflows during April-December 2025.

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healthy buffer DIIs consistent net buyers of equities even during bouts of FPI selling

Mutual funds have been at the vanguard of this evident shift in the centre of gravity in the Mumbai stock universe. Their share by value of holdings touched a record 10.9% in the September quarter, led by steady household inflows through systematic investment plans (SIP).

The share of DIIs by value of holdings surpassed that of FPIs for the first time in the March 2025 quarter. This trend strengthened in FY26, with DII holdings rising to an all-time high of 18.3% in the September 2025 quarter while FPI holdings declined to 16.7%, a 13-year low.

The combined share of DIIs, retail investors and high-net-worth individuals reached an all-time high of 27.8% in the September quarter. The share of equity and mutual funds in annual household financial savings rose sharply to over 15.2% in FY25 from around 2% in FY12.

Primary markets also remained resilient. IPO volumes in the current fiscal year up to December 2025 were 20% higher than FY25, while funds mobilised rose 10%. Mainboard IPOs increased to 94 from 69, raising ₹1,60,273 crore, with offers for sale (OFS) accounting for 58% of proceeds. SME listings climbed to 217, mobilising ₹9,635 crore during the period.