MUMBAI: There was a time when heavy foreign investor selling could rattle Indian equity markets. That dynamic is no longer a given.
Speaking at the annual Mint BFSI Summit, held last week, DP Singh, deputy managing director and joint chief executive officer of SBI Mutual Fund, said that while foreign investors may be selling in parts of the market, they continue to deploy capital through initial public offerings (IPOs) and other asset classes.
After three straight months of selling since July, foreign investors briefly returned as buyers in October and November, pumping ₹10,167.46 crore and ₹332.76 crore, respectively, into Indian equities. That respite proved fleeting. By 15 December, foreign institutional investors (FIIs) had once again turned net sellers, pulling out ₹12,701.40 crore.
What has changed materially, Singh said, is the sheer scale of domestic retail participation. Nearly ₹30,000 crore flowing in every month through systematic investment plans (SIPs) has emerged as a powerful counterweight, cushioning markets and muting the kind of volatility that would once have followed sustained foreign selling.
In 2024, SIP contributions stood at nearly ₹2.68 trillion. In 2025, till the end of November, the figure had already climbed to ₹3.04 trillion.
During a three-member panel discussion on whether domestic mutual funds have evolved into true market drivers or remain passengers of broader trends, Nilesh Shah, managing director of Kotak Mahindra Asset Management Company, wryly thanked foreign portfolio investors. “They are selling, that’s why we (MFs) are able to buy,” he said.
Echoing the growing confidence in domestic capital, panelist Sundeep Sikka, executive director and CEO of Nippon Life India Asset Management and chairman of the Association of Mutual Funds of India (Amfi), said mutual funds now have the muscle to create wealth for investors. “…there cannot be a better time to be in India where the Indian growth story is fuelled by domestic household savings.”
Shah struck a note of ambition. “We have done well but when we look at the potential, we have barely scratched the surface.”
The domestic mutual fund industry has expanded sharply over the past decade. Assets under management (AUM) have risen more than sixfold, from ₹12.95 trillion as of 30 November 2015 to ₹80.80 trillion as of 30 November 2025. Over the last five years alone, AUM has nearly tripled, growing to ₹80.80 trillion in November 2025 from ₹30.01 trillion in November 2020.
Against the backdrop of passive investing gaining traction as investors become more mature, investors now have a clear choice, and active funds make sense only if they add value to a portfolio by consistently outperforming benchmark indices. “And if not, then passive is the best option.”
Even so, he sees active exchange traded funds (ETFs) gaining ground in India, alongside greater innovation in passive investment products.
Scaling up
Outlining the next phase of growth for the mutual fund industry, Sikka said it would be driven by deeper household penetration, with the ambition of every Indian household becoming a mutual fund investor—a milestone he believes could be achievable over the next decade.
Growth, he added, is expected to increasingly come from tier-2 and tier-3 cities.
Singh echoed that view, noting that expanding the investor base from over 50 million to nearly 300 million would require far greater capacity than currently available. With constraints on both manufacturing bandwidth and distribution strength, technology will play a critical role in scaling the industry, he said.
That said, Sikka emphasised that the human touch will remain central in an industry where advisory services play a critical role. Drawing a parallel with banking, he noted that despite rapid digitisation, Indian banks opened a record number of physical branches in the last financial year.
The message for mutual funds, he said, is similar: technology is essential, but physical engagement and personal advice continue to matter.
