Exchange-traded funds (ETFs) have played a crucial role in driving the nearly 80 per cent gain recorded by domestic markets since 2021. They are also emerging as dominant investors, with their holdings now exceeding a tenth of the total free-float market capitalisation (mcap).
“As a testament to their growing influence, passive flows have been major contributors to the market rally observed over the past few years. Since 2021, domestic ETFs have channelled net inflows of $52 billion into domestic stocks,” says Sriram Velayudhan, senior vice-president at IIFL Securities.
The combined holdings of domestic and overseas