In a significant development, data from the National Stock Exchange (NSE) reveals that domestic investors, including mutual funds and individual retail participants, now hold more shares than foreign portfolio investors for the first time since 2006. This shift comes amid consistent selling by foreign investors over the past year and increased buying activity by local institutions. The analysis, based on shareholding data as of December 2024, highlights that foreign ownership has dropped to its lowest level in 13 years. Meanwhile, mutual funds have achieved an all-time high stake in NSE-listed companies, driven by substantial systematic investment plan (SIP) inflows. Additionally, direct non-promoter ownership by individual investors has reached an 18-year peak, marking a notable transformation in the Indian equity market landscape.

The evolving dynamics of India's equity market reflect a growing prominence of domestic investors. Since October of the previous year, foreign funds have been steadily divesting their holdings, while mutual funds and retail investors have taken up the slack. Mutual funds have particularly surged, with their share rising to an unprecedented 10% in NSE-listed firms. In the December quarter alone, these funds injected a record net amount of Rs 1.5 lakh crore, followed by another Rs 71,000 crore in the initial one-and-a-half months of the new quarter. This brings the total net inflows to Rs 4.2 lakh crore for the fiscal year thus far. The robust performance of mutual funds underscores the confidence of retail investors in the domestic market.

Individual investors have also played a pivotal role in this transformation. Their direct non-promoter ownership in Indian companies has climbed to a near 18-year high of 9.8%, complementing the indirect investments made through mutual funds. Collectively, individuals now own a record-high 18.2% of the total market capitalization, surpassing the 17.4% held by foreign portfolio investors. This reversal of roles highlights the increasing significance of retail investors in shaping the equity market. Over the last five years, household wealth in Indian equities has surged by over Rs 46 lakh crore, with much of this growth occurring in the past two years.

The changing ownership patterns also extend to promoter stakes in Indian companies. Promoter holdings have seen a steady decline, falling to 49.6% overall and reaching a two-decade low of 41.4% in the Nifty index. This reduction is broad-based, with government holdings experiencing the most significant drop. The diminishing promoter influence reflects broader shifts in corporate governance and investor base diversification within the Indian equity market.

This shift in ownership signifies a new era for the Indian equity market, characterized by heightened participation from domestic players. The growing involvement of mutual funds and retail investors not only demonstrates increased trust in the market but also contributes to a more diversified and resilient financial ecosystem. As the market continues to evolve, the contributions of these domestic stakeholders will likely play a crucial role in shaping future trends and performance.