The days when sustained selling by foreign institutional investors (FIIs) could single-handedly trigger sharp volatility in Indian stock markets appear to be fading. A new era is emerging, powered by the formidable and consistent flow of domestic capital, particularly through systematic investment plans (SIPs). This shift in market dynamics was a central theme at the recent annual Mint BFSI Summit, where top mutual fund industry leaders outlined how India's financial landscape is being reshaped.
The Domestic Pillar: SIPs as a Market Shock Absorber
DP Singh, Deputy Managing Director and Joint CEO of SBI Mutual Fund, highlighted a material change. While foreign investors continue to engage in the market, including through initial public offerings (IPOs), their influence on daily volatility has diminished. The key counterforce is the sheer scale of domestic retail participation, with nearly ₹30,000 crore flowing into equities every month via SIPs. This massive inflow acts as a powerful cushion, muting the market swings that once followed foreign selling.
The data underscores this growing clout. SIP contributions reached nearly ₹2.68 trillion in 2024. For 2025, up to the end of November, the figure had already surged to ₹3.04 trillion. This consistent domestic pool is altering the fundamental equation of market liquidity.
From Passengers to Drivers: The Rising Confidence of Domestic MFs
During a panel discussion on whether domestic mutual funds have become true market drivers, the sentiment was one of confident assertion. Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company, noted wryly that foreign portfolio investors are selling, which in turn allows domestic mutual funds to buy. This highlights a newfound ability to set market trends rather than just follow them.
Sundeep Sikka, Executive Director & CEO of Nippon Life India Asset Management and Chairman of AMFI, echoed this confidence. He stated that mutual funds now possess the necessary muscle to create wealth for investors, declaring there "cannot be a better time to be in India where the Indian growth story is fuelled by domestic household savings." However, Shah added a note of ambition, suggesting the industry has "barely scratched the surface" of its potential.
The growth trajectory is staggering. The industry's Assets Under Management (AUM) have skyrocketed more than sixfold in a decade, from ₹12.95 trillion in November 2015 to ₹80.80 trillion in November 2025. In just the last five years, the AUM has nearly tripled from ₹30.01 trillion in November 2020.
The Passive Investing Challenge and the Path to Scale
As investors mature, passive investing is gaining traction. Shah pointed out that active funds must justify their existence by consistently outperforming benchmarks; otherwise, passive options become the preferred choice. He also foresees growth for active exchange-traded funds (ETFs) and more innovation in passive products in India.
Looking ahead, the industry's next growth phase will focus on deeper penetration. Sikka outlined the ambitious goal of making every Indian household a mutual fund investor, a milestone he believes achievable within the next decade. Tier-2 and tier-3 cities are expected to be significant growth drivers.
Scaling from over 50 million to nearly 300 million investors will demand immense capacity. DP Singh acknowledged that current manufacturing and distribution strengths face constraints, making technology a critical enabler for this expansion. Yet, Sikka emphasized that the human touch remains irreplaceable. He drew a parallel with banking, where despite digital adoption, a record number of physical branches were opened last year. For mutual funds, the lesson is clear: while technology is essential, personal advice and physical engagement continue to hold vital importance.
The narrative is clear. The Indian equity market is undergoing a profound structural shift. The once-dominant influence of foreign capital flows is being balanced, and often outweighed, by the disciplined, long-term power of domestic savings, channeled through mutual funds. This not only insulates the market from external shocks but also places its destiny increasingly in the hands of Indian households.
