Foreign institutional investors (FIIs) had been the largest group of non-promoter shareholding on Indian stock exchanges for about two decades, and their buy-sell pattern controlled the direction of the stock market.
When the appetite for risk among investors abroad declined, the Indian stocks suffered. When risk appetite improved, Indian stocks revived.
That dependence has now undergone a fundamental transformation.
According to the NSE India ownership tracker for the quarter ended March 2026, domestic institutional investors (DIIs) commanded a record 19.6% of NSE-listed companies, while FII ownership slipped to 15.8%, its lowest reading in seventeen years.
This marked the sixth consecutive quarter in which DIIs outweighed foreign investors, with the gap between them the widest in over a hundred quarters.
Backed by steady SIP inflows, domestic mutual funds’ ownership of NSE-listed companies hit a record 11.4% in March 2026.
Underpinning this realignment is the steady migration of household savings into equities, channelled predominantly through SIP’s, which converts millions of monthly salaries into a disciplined investment.
According to AMFI data for May 2026, monthly SIP contributions stood at approximately ₹30,954 crore, the third successive month above the ₹30,000 crore threshold and roughly 16% higher than a year earlier.
SIP assets reached around ₹17.12 lakh crore across nearly 9.64 crore accounts, while the mutual fund industry as a whole managed close to ₹81.58 lakh crore.
The behaviour matters more than any single figure, since SIP capital represents a recurring commitment rather than an opportunistic wager.
This is why Indian equity mutual funds have now recorded net inflows for 63 consecutive months, an unbroken run that began in March 2021 and has endured a pandemic, two wars and recurring currency turbulence.
The strength of this framework comes from the difference between hot money and patient capital.
FII flows are driven by global cues such as US interest rates and the dollar, and they can withdraw at a moment’s notice.
DII capital is of a different character.
It is rooted in enduring domestic mandates such as retirement provision, insurance and household savings, and it is sourced from mutual funds, insurers such as LIC, banks and the long-horizon pools of EPFO and the NPS, which renders it considerably more stable.
Foreign investors have, in fact, been selling in earnest.
India had grown expensive relative to peer emerging markets, and global funds redirected capital towards AI-linked enterprises in Northeast Asia.
Foreign investors were net sellers of about ₹1.66 lakh crore of Indian equities in Calendar 2025, and withdrew a further ₹1.92 lakh crore by early May 2026, already exceeding the whole of the previous year.
Even so, the market proved remarkably composed. The most compelling evidence arrived in March 2026.
In that single month, FIIs liquidated roughly ₹1.18 lakh crore, while DIIs absorbed close to ₹1.16 lakh crore, neutralising almost the entire wave of selling.
The Sensex declined about 11.5%, and the Nifty about 11.3%, yet equity mutual funds still attracted around ₹40,450 crores that month.
Investors did not even retreat to safety, as flexi-cap, mid-cap and small-cap funds all drew fresh allocations.
Across the first half of 2026, DIIs deployed a record of roughly ₹4.3 lakh crore. None of this renders the market risk-free.
The prolonged inflow streak has yet to be tested by a deep, multi-year downturn.
Accumulating through declines has succeeded largely because each correction has been followed by a recovery.
Heavy allocations into small and mid-caps are likewise inflating valuations in those segments.
Since much of this support is routed through mutual funds, its durability depends on investors sustaining their SIPs (systematic investment plans) through a prolonged decline.
For the individual Indian investor, this shift ranks among the most favourable structural developments in years.
Market drawdowns are growing shallower and more fleeting because domestic institutions now intervene to absorb foreign selling and temper the abrupt collapses that once trailed every overseas exit, as March 2026 illustrated.
The market is increasingly governed by domestic determinants such as corporate earnings, the investment cycle and consumer demand, rather than by the vagaries of global sentiment, which lends greater predictability to a long-term, rupee- denominated saver.
Every foreign sell-off now presents an opportunity to accumulate, because the disciplined SIP investor who continues to buy while foreign capital departs is, in effect, acquiring quality assets from apprehensive sellers.
This is precisely the approach that has rewarded domestic institutions for more than a decade.
Equally significant, influence over the market has shifted towards ordinary citizens.
The aggregate monthly savings of everyday investors now move the market more than any foreign desk, transforming them into genuine participants in national wealth creation, while deeper and more liquid markets enable companies to raise capital and reinforce the broader economy.
This resilience is a formidable support rather than a guarantee. Investors should still diversify across market capitalisations and asset classes, and the rising appetite for gold and multi- asset funds is a prudent reflection of this.
Disclaimer: The author of this article is a fund manager at Bonanza. Views are strictly of the author, not of Mint. This article is for educational purposes only and does not constitute investment advice. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
