India’s equity market witnesses a significant shift as domestic institutional investors reach record high holdings, while foreign portfolio investor ownership hits a 15-year low amid global uncertainties and geopolitical tensions, reshaping the market’s power dynamics.
Domestic institutional investors have become the main counterweight to foreign selling in India’s equity market, with their share of holdings rising to a record 17% by March 2026, according to the Securities and Exchange Board of India’s latest annual report. The regulator said foreign portfolio investor ownership fell to a 15-year low of 15.8%, underlining a sharp shift in market control towards local money as overseas investors retreated.
SEBI said the backdrop was unusually difficult, with geopolitical तनाव, trade tensions, higher crude prices and firmer US bond yields driving risk aversion. The report said the Nifty 50 touched a record 26,328.6 in early January 2026 before Middle East tensions triggered a 15.2% pullback, leaving the index down 5.1% for the year. Even so, India’s total market capitalisation slipped only slightly to ₹411.6 lakh crore, keeping it the world’s fifth-largest stock market.
Business Standard reported that domestic institutional investors held 20.9% of Nifty-500 companies as of March 2026, while foreign institutional investors fell to 17.1%, reflecting the same broad trend seen across the wider market. Livemint said foreign portfolio investors had already reduced their holding in NSE-listed companies to 16.7% in the quarter ended December 2025, while domestic mutual fund ownership reached an all-time high of 11.1%. NDTV Profit and The New Indian Express both reported that the foreign share slipped further to 15.8% in March 2026, with record outflows during the fiscal year.
The domestic shift was helped by strong retail participation. SEBI said the mutual fund industry’s assets under management rose 12.2% to ₹73.7 lakh crore in March 2026 from ₹65.7 lakh crore a year earlier, while unique investors climbed 13.2% to 6.1 crore. Tier III cities accounted for 55% of investors, and systematic investment plans remained a key source of steady inflows, with active accounts rising to 10.45 crore and average monthly contributions hitting a record ₹16,413 crore. Passive funds also attracted ₹2.1 lakh crore of net inflows, while gold exchange-traded funds drew a surge of money as investors sought a hedge against uncertainty.
Derivatives trading, meanwhile, cooled after regulatory tightening. SEBI said options contract volumes dropped 51.5% as changes to contract sizes, weekly expiries, premium collection rules and securities transaction tax were used to curb speculative retail activity. Commodity derivatives went the other way, with futures turnover up 133.1% to ₹166.4 lakh crore and option premium turnover rising 107.2%, helped by a global rally in energy and precious metals. The number of alternative investment funds also increased to 1,829 by March 2026, with total commitments climbing 25.6% to ₹16.9 lakh crore.
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