MUMBAI: Foreign portfolio investor (FPI) ownership in Indian stocks has fallen to its lowest level in over 15 years, while domestic mutual funds have reached an all-time high, according to data for the quarter ended December 2025. The shift underscores the rising clout of local capital in shaping market direction [citation:1][citation:2].
- FPI stake in NSE-listed firms: 16.7% in Dec 2025, lowest since 2010 [citation:1][citation:4]
- Domestic mutual funds: record 11.1% holding, up consistently for four quarters [citation:1][citation:2]
- Value of FPI holdings: still grew 4.6% sequentially to âš78.7 lakh crore, despite lower share [citation:4]
- FPI outflows in 2025: $18.9 billion â highest on record [citation:2][citation:4]
- February turnaround: FPIs bought âš14,988 cr in Feb so far, reversing three-month selling [citation:1]
- SIP momentum: âš2.87 lakh crore in first 10 months of FY26, almost equalling full FY25 [citation:1]
Structural shift towards self-reliance
The steady decline in FPI ownershipâinterrupted by only two upticks in the last 11 quartersâreflects sustained selling by foreign funds since March 2023 [citation:4]. At the same time, domestic institutional investors (DIIs), particularly mutual funds, have absorbed the supply, buoyed by robust systematic investment plan (SIP) flows [citation:1][citation:2].
"The balance of ownership in Indian equities is tilting inward, reinforcing the marketâs growing atmanirbharta (self-reliance). Mutual funds alone seem set to overtake FPIs in the coming quarters," said Pranav Haldea, Managing Director, PRIME Database Group [citation:1].
Whatâs driving FPI outflows?
Foreign investors sold Indian equities worth âš74,031 crore in the ongoing financial year till January 2026, following âš1.27 lakh crore of selling in FY25 [citation:1]. Global factorsâelevated US interest rates, a strong dollar, and uncertainty over rate cutsâprompted a shift away from emerging markets. However, February has seen a reversal, with net purchases of âš14,988 crore [citation:1].
đ Domestic resilience: MFs & retail step up
Despite FPI selling, benchmark indices have delivered positive annual returns and hit record highs. SIP inflows remain strong, indicating sustained retail participation. Mutual funds increased stakes in several companies for four consecutive quarters [citation:1][citation:3].
đ Global macro: dollar weakness may support FPI return
Dr. V.K. Vijayakumar of Geojit notes that US dollar weakness could discourage further FPI selling. "Foreign investors in US equities earned only 2-4% in dollar terms due to depreciation. Global macro indicators suggest further dollar weakness, making emerging markets like India attractive" [citation:1].
âď¸ Reduced FPI dependence: boon for stability?
G. Chokkalingam, Equionomics Research, argues that lower FPI reliance reduces volatility. "Markets historically driven by FPIs saw sharp swings impacting the rupee and borrowing costs. Consciously reducing dependence is good for the market and economy" [citation:1].
FPI ownership in key indices
Within the Nifty 50, FPI share fell by 25 basis points sequentially to 23.8%âa more than 13-year low. In the broader Nifty 500, it held steady at 18.1% [citation:4]. FPIs remain overweight on financials and communication services, while staying underweight on consumer staples, materials, and energy [citation:4].
Where mutual funds increased stake (4 quarters)
| Company | MF holding (latest qtr) | Change (4 qtrs) |
|---|---|---|
| RBL Bank | 34.4% | +19.2% |
| Ujjivan Small Finance Bank | 23.8% | +19.1% |
| Sai Life Sciences | 27.6% | +16.0% |
| Aptus Value Housing | 22.3% | +13.3% |
| Zomato | 26.7% | +7.4% |
Source: Equitymaster [citation:3]. Data for illustration, not recommendations.
Outlook: Will FPIs return in force?
Analysts believe 2026 may see a reversal of sustained selling. Earnings growth is at an eight-quarter high of 14.7%, and indications point to further recovery [citation:1]. Mid-cap valuations are also seen as attractive after recent corrections. "FPIs have historically created wealth by being long-term investors. Their medium-to-long-term holding period gives confidence," noted Chokkalingam [citation:1].
Dr. Vijayakumar adds, "Global macro and earnings fundamentals both point to a more supportive environment. FPIs are unlikely to replicate the heavy selling of the past two years." [citation:1]
Key takeaways
- FPI stake at 16.7% â lowest since 2010, reflecting sustained outflows [citation:1][citation:4].
- Domestic MFs at record 11.1% â driven by SIP inflows and retail participation [citation:1][citation:2].
- February turnaround: FPIs turned net buyers, purchasing âš14,988 cr so far [citation:1].
- Self-reliance grows: DIIs cushion volatility; reduced FPI dependence seen as positive for long-term stability [citation:1].
- Global cues: Weak dollar and attractive valuations may encourage FPI flows in coming months [citation:1].
- Earnings support: 14.7% earnings growth (eight-quarter high) underpins market resilience [citation:1].
Disclaimer: This report is based on analysis of public data and expert commentary. Mutual fund holdings data is for informational purposes and not stock recommendations. Investors should consult certified advisors before making decisions.