Industry experts say the milestone reflects a structural shift in India’s capital markets, driven by growing domestic participation and increasing investments in debt funds and ETFs.
Thanks to the exuberance of retail investors, the assets under control (AUC) of mutual funds across debt, equity, and ETFs have surpassed those of Foreign Portfolio Investors (FPIs) for the first time ever, driven by steady inflows of over ₹30,000 crore into mutual funds through SIPs.
The AUC of mutual funds stood at ₹76.41 lakh crore, while that of FPIs was marginally lower at ₹76.22 lakh crore, according to NSDL data.
Mutual funds overtake FPIs in overall assets
Despite foreign investors selling heavily in the equity markets, FPI holdings remained higher at ₹68.65 lakh crore, while mutual funds’ holdings stood at ₹54.50 lakh crore.
FPIs have pulled out $28 billion from equity markets over the last six months amid concerns over elevated valuations, subdued returns, and rising crude oil prices driven by escalating geopolitical tensions.
Mutual fund assets in debt and ETFs stood at ₹21.91 lakh crore, significantly higher than the ₹7.58 lakh crore in FPI debt assets held across the general, Fully Accessible Route (FAR), Voluntary Retention Route (VRR) and hybrid categories. A mutual fund cannot invest through the VRR route as it is meant exclusively for FPIs.
Apart from equities, investors are allocating capital to debt funds and exchange-traded funds, driven by the attractive risk-return profiles of debt and multi-asset products.
Retail inflows reshape India’s investment landscape
Aditya Agrawal, CFA, Chief Investment Officer at Avisa Wealth Creators, said, “The fact that mutual funds have overtaken FPIs in overall assets marks a structural shift in India’s capital markets, driven by consistent SIP inflows, rising retail participation, and increasing adoption of debt and ETF products.”
The equity holdings gap is likely to narrow gradually if domestic inflows continue at the current pace. However, overtaking FPIs in equities could still take a few years, given their sizeable existing equity base, he said.
FPIs retain edge in equities despite sustained outflows
Shashank Udupa, Founder of Vayu Capital, said FPIs still lead mutual funds by about ₹14 lakh crore in equity holdings, and much of that advantage has been built over the past 2-3 decades through investments in large-cap stocks and index constituents. In contrast, the strong SIP-driven growth in mutual funds is a relatively recent phenomenon, dating back 5-7 years.
FPI participation in the debt market is also expected to strengthen following the inclusion of Indian government bonds in the global bond indices of both JPMorgan and Bloomberg. A significant portion of the passive inflows linked to these inclusions is yet to materialise, he added.
Published on July 8, 2026