Domestic investors now own more Indian stocks than foreigners

As of the quarter ending March 2025, domestic institutional investors (DIIs)—which include mutual funds, insurance companies, and banks—held 16.9% of the total outstanding equity of companies listed on the Stock Exchange, narrowly surpassing the 16.8% held by foreign portfolio investors (FPIs), according to data compiled from Ace Equity database.

The development also underscores the maturation of India’s retail investment landscape, driven by rising systematic investment plans (SIP), going into mutual funds, and broader retail participation—factors that have significantly contributed to the increase in DII ownership.

To be sure, overseas investors have been consistent net sellers of Indian equities over the past few months, citing stretched valuations and subdued earnings growth. Between October 2024 and February 2025, they cumulatively offloaded shares worth ₹2.3 lakh crore.

In contrast, domestic investors stepped in to absorb the selling pressure, injecting nearly ₹3.5 lakh crore during the same period. Notably, in the March quarter alone, domestic institutional investors purchased equities worth ₹1.9 lakh crore, while foreign investors sold shares amounting to ₹1.2 lakh crore.

The increased dominance of local institutional investors marks a significant shift from the past when foreign investors held a much larger share of Indian equities.

For example, in March 2015, FPIs owned as much as 20.7% of Indian equities—nearly double the 10.4% held by DIIs. The narrowing and eventual reversal of this gap highlights the deepening of domestic capital markets and the rising influence of Indian investors.

However, it is worth noting that overseas investors were allowed direct access to Indian stock markets following liberalisation, and since then, Indian equities have generally outperformed most other emerging markets. This confidence led to massive foreign inflows, with the Indian market receiving $29.3 billion in 2010 and another $25 billion in 2012.