Local flavor

Retail investors' share in market capitalization is rising and along with domestic institutions offsetting the withdrawal of Flls

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Indian stock markets have been on a winning spree in recent weeks, extending gains to record highs following interest rate cuts by India’s central bank amid cooling inflation and the US central bank to counter labor weakness.

Local equity indices have been holding up, with the benchmark Nifty 50 index rallying around 9% in CY 2025 to date despite heavy selling by foreign institutional investors (FIIs). They have taken out around Rs 1.60 lakh crore from equity markets till in CY 2025 till 11 December. It seems buying by domestic retail and institutional investors is offsetting and setback to equities due to the withdrawal of FIIs.

India’s capital markets are undergoing a major shift as domestic household savings us replacing FIIs, reducing the stock market's dependence on volatile global capital. FIIs’ ownership of Indian equities has fallen to a 15-month low, while that of domestic mutual funds and retail investors is reaching new highs. Systematic Investment Plans (SIPs) are bringing in record inflows.

Individual investors, through direct holdings and MFs, now own nearly 19% of the equity market, the highest in over two decades, believing in the long-term economic potential of the Indian economy. A favourable demographic profile clubbed with sustained post pandemic improvement in economy and falling inflation are attracting domestic investors.

Securities and Exchange Board of India (SEBI) Chairperson Tuhin Kanta Pandey recently highlighted the growing confidence of Indian investors in the country’s capital markets. As of October 2025, India had nearly 13.6 crore investors holding more than 21 crore demat accounts, signalling a strong faith in the market. About one lakh new demat accounts are being opened every day, demonstrating rising interest, particularly among retail investors. Over Rs 80 trillion has been invested in the mutual fund industry, marking a growth of more than seven times in just a decade.