A major change is taking place in the Indian stock market. According to SEBI’s annual report for 2025-26, domestic institutional investors increased their share in Indian equities to a record 17% by the end of March 2026, while foreign portfolio investors saw their holding fall to a 15-year low of 15.8%.
This shift shows that the market is becoming more supported by local money than before. Domestic investors, including mutual funds, banks, insurance firms, development finance institutions, and the National Pension System, stepped in strongly during the year and helped absorb selling pressure from foreign investors. SEBI said this created a clear structural realignment in ownership patterns.
The report also shows how large the domestic flow became in FY26. Domestic institutional investors recorded net equity inflows of about Rs 8.5 lakh crore, while foreign portfolio investors saw net outflows of Rs 1.8 lakh crore. This difference was one of the main reasons why domestic ownership rose, and foreign ownership slipped lower.
Mutual funds played an especially important role in this trend. Regular Systematic Investment Plan flows remained steady through the year, which helped domestic institutions keep buying even when global conditions were unstable. In simple terms, this meant that many small and steady investments together became powerful enough to support the broader market.
Foreign investors faced several pressures during the year. Global uncertainty, geopolitical worries, tariff-related concerns, high valuations, and slower corporate earnings growth all affected their appetite for Indian equities. SEBI noted that these factors led to a record net outflow from foreign investment in Indian securities during 2025-26.
For the market, this change carries an important message. Indian equities are no longer depending as much on foreign flows as before, and domestic savings are becoming a stronger base for growth. That can make the market more stable over time, because local investors usually invest with a longer horizon and are less likely to react sharply to short-term global shocks.
Still, the rise in domestic ownership does not mean foreign investors have become unimportant. Their participation continues to matter for liquidity, price discovery, and international confidence in Indian markets. What has changed is the balance of power, with domestic investors now playing a larger and more visible role in shaping the direction of equities.
In simple terms, the message from SEBI’s report is clear: Indian markets are becoming more home-driven. The growing strength of domestic investors, especially mutual funds and SIP-based flows, is now acting like a strong pillar under the equity market, even as foreign money moves in and out with global trends.
