The gap separating domestic mutual fund holdings from those of foreign portfolio investors in Indian equities has contracted to roughly 230 basis points, a margin not previously recorded at that level.

Data from the National Securities Depository Limited showed mutual funds' proportion of Indian equity holdings climbing to an all-time high of 11.7% in September, even as the stake held by foreign portfolio investors slipped to under 14%. Foreign portfolio investors' ownership stake, which touched 20% at its peak in May 2021, has since retreated, while domestic mutual funds have built their portion up from roughly 7% over that same stretch.

Mutual fund holdings accounted for an 11% share of the total during January of the comparable period. Foreign investors offloading holdings at a record pace, combined with domestic mutual funds maintaining a steady stream of equity purchases fuelled by retail inflows, has narrowed the gap between the two ownership groups.

Samir Arora, founder and fund manager at Helios Capital Management, noted that domestic investors tend to hold the dominant position across markets worldwide and that India is following the same pattern. Over the medium term, domestic institutional investors are positioned to hold a larger share of the market than their foreign counterparts, he added.

Custody data for September put the aggregate equity stake held by foreign portfolio investors at ₹66.18 lakh crore — a level not recorded since March 2026 — while the comparable figure twelve months prior had stood at ₹77.96 lakh crore, a point at which those investors held around 16.4% of Indian equities and the portfolio valuation had reached its highest mark on record.

Equity holdings within mutual funds reached approximately ₹55.14 lakh crore, a figure representing nearly a threefold expansion from the roughly ₹20 lakh crore recorded in April 2022. From a base that had grown to roughly ₹40 lakh crore by January 2024, the corpus went on to breach the ₹50 lakh crore threshold before October 2025 had concluded.

Ritesh Jain, who heads Pinetree Macro out of Canada, projected that mutual funds, high-net-worth individuals, and family offices would together come to hold a growing portion of that market. Among Nifty 500 constituents, the shift in ownership composition has grown more distinct, with domestic institutional investors having moved ahead of their foreign portfolio counterparts in terms of shareholding weight.

Domestic institutional investor holdings climbed to 21% of the tracked portfolio in the first quarter of FY27, marking a ninth straight quarterly gain and a fresh peak, while foreign portfolio investor ownership slipped to 17%, per a note published by Motilal Oswal Financial Services.

Shifts in how the Indian economy is structured may be playing a part in shaping where foreign portfolio investors choose to direct their capital. Overseas capital, long concentrated in banking and technology stocks, has begun directing attention toward sectors that once sat outside its typical investment horizon.

Foreign portfolio investors have pulled back their holdings across a range of industries, with IT, FMCG, consumer services, realty, and financials all registering reduced ownership stakes. Overseas investors did not move in a single direction, instead building up positions across capital goods, metals and mining, telecom, services, and healthcare.

Whether overseas investors rediscover their appetite for Indian equities may hinge on a meaningful rebound in corporate earnings, particularly as Taiwan and Korea draw growing attention on the back of AI-driven capital flows. Assuming annual earnings growth of 14–15% alongside currency depreciation in the 2–3% range, overseas investors could still expect net returns of roughly 12%, Arora noted.