FPI ownership in NSE-listed firms hits 13.5-year low; domestic MFs scale new peak

Foreign portfolio investors’ (FPIs) stake in NSE-listed companies dropped to 17.3% in June quarter of 2025, the lowest in nearly 13.5 years, even as domestic mutual funds (DMFs) scaled a fresh record high of 10.6%, according to NSE Market Pulse report.

Barring a marginal uptick in two quarters, FPIs ownership in NSE-listed companies has been on a steady decline since March 2023, reflecting persistent volatility in foreign capital flows, the report noted. The trend carried into the new fiscal year, with FPI share slipping by 16 basis points (bps) quarter-on-quarter to 17.3% in June 2025.

Interestingly, FPIs continued to show a clear bias for large-cap counters. Their ownership in Nifty50 firms inched up by 21 bps QoQ to a six-quarter high of 24.5%, underlining a defensive preference for market leaders amid heightened macroeconomic and geopolitical uncertainty. In contrast, their holding in the Nifty500 universe remained largely steady at 18.5%, as per the NSE monthly report.

Sector-wise, FPIs strengthened their overweight stance on financials, turned incrementally positive on communication services, but remained cautious on consumer staples, energy, and materials, while maintaining a negative stance on industrials, the report highlighted.

“Over the past decade, the influence of FIIs on Indian equities has structurally moderated. FII shareholding in NSE-listed companies has declined from over 20% during FY14-20 to about 16% in 2024. This reflects increased volatility in foreign flows, driven by global factors such as rising U.S. interest rates, a stronger dollar, and relative valuation concerns,” said Ajit Mishra – SVP, Research, Religare Broking.

Domestic MFs ownership rise to new record high

Aided by continued net investments, domestic mutual funds (DMFs) continued to strengthen their grip on Indian equities in the June quarter (Q1 FY26), with their shareholding in NSE-listed companies rising to a fresh all-time high. Backed by net inflows of ₹1.2 lakh crore into equities — the 17th straight quarter of positive flows — DMFs’ ownership climbed to 10.6% in the NSE universe, and further to 11% in the Nifty500 and 13% in the Nifty50, the NSE data showed.

As per the NSE report, this surge was driven by sustained retail participation through systematic investment plans (SIPs). Average monthly SIP inflows stood at ₹26,863 crore in Q1FY26, up 2.9% QoQ and a sharp 28.9% YoY. Within the DMF share, passive funds remained steady at 1.9%, while actively managed funds expanded by 22 bps QoQ to 8.6%.

On the portfolio side, DMFs realigned closer to index weights but also showed selective shifts. “Contrary to FPIs, DMFs slightly trimmed their OW stance on large-cap Financials, tapered their negative bias on Consumer Staples, and turned incrementally positive on Materials and smaller Consumer Discretionary stocks,” the report noted.

Meanwhile, DMFs turned incrementally bearish on Energy, reflecting the impact of softening crude oil prices, weakening refining margins and policy and regulatory uncertainty.

The report also highlighted that direct ownership of individual in the NSE-listed companies rose modestly to 9.6% during Q1 FY26, supported by steady retail participation. When combined with their investments routed through domestic mutual funds, households now control a record-high 18.5% of India’s listed equity market, up 30 bps sequentially.

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