Indian households experienced a brutal ₹12.6 lakh crore erosion in equity holdings during Q4FY26, according to the latest NSE Market Pulse report, as the benchmark Nifty fell more than 10% during one of the most volatile quarters in recent years. Despite this severe correction, 62% of equity mutual fund schemes outperformed their respective benchmarks and 72% beat the Nifty 50 TRI during the same period. The selloff was driven by escalating Iran conflict concerns, a spike in global crude oil prices, heavy foreign portfolio investor outflows, and weakening sentiment toward emerging markets as global capital increasingly shifted toward artificial intelligence-linked opportunities in Taiwan and South Korea. As per the NSE report, combined household ownership in NSE-listed companies through direct holdings and mutual fund investments declined nearly 13% quarter-on-quarter to ₹76.5 lakh crore as of March 2026.
Foreign portfolio investors recorded net outflows of $19.6 billion during FY26, with their ownership in NSE-listed companies falling to a 17-year low of 15.8%. FPI ownership in the Nifty fell 2 percentage points quarter-on-quarter to 21.8%, while their shareholding in the Nifty 500 declined to 16.8%. However, domestic mutual fund ownership rose to a record 11.4% in the March quarter, supported by sustained SIP inflows and continued retail participation through systematic investments. This marked the 11th consecutive quarter of record-high mutual fund ownership, with overall domestic institutional investor ownership standing at 19.6%, remaining above FPI ownership for the sixth straight quarter. The ownership gap between individuals and FPIs has reversed sharply over the last decade, with the gap now at 2.9 percentage points in favour of individuals, compared to 11 percentage points in favour of FPIs in March 2014.
Despite the sharp correction, cumulative household equity wealth creation since April 2020 still remains substantial at around ₹44 lakh crore, though the annualised growth rate has moderated. The March quarter correction came amid intense macroeconomic pressure, with Brent crude prices surging sharply as tensions in West Asia escalated, increasing concerns around India's inflation outlook, current account deficit and currency stability. Direct ownership of individual investors in NSE-listed companies fell for the second straight quarter to a five-year low of 9.1%, but analysts note this does not indicate retail exit from equities. Instead, households are increasingly shifting toward mutual fund-based investing rather than direct stock ownership, with retail participation through SIPs remaining resilient even during periods of market volatility.
PPFAS Mutual Fund emerged as the standout performer with both schemes outperforming benchmarks and Nifty 50 TRI, achieving a 100% success rate. HSBC Mutual Fund followed closely with 13 out of 14 schemes outperforming benchmarks, translating to a 93% success rate, while Edelweiss Mutual Fund recorded 11 out of 12 schemes outperforming benchmarks (92% outperformance ratio). Kotak Mutual Fund delivered strong performance with 22 out of 25 schemes outperforming benchmarks and 21 schemes beating the Nifty 50 TRI. Among large fund houses, SBI Mutual Fund recorded 18 schemes outperforming benchmarks and 19 beating the Nifty 50 TRI out of 24 schemes analysed.
The quarter was marked by significant macroeconomic stress globally, with disruption around the Strait of Hormuz severely affecting India's crude oil and LNG imports, increasing concerns around inflation, current account deficits, and rupee weakness. At the global level, the US-Israel military operation against Iran and subsequent disruption in energy supply chains pushed oil prices sharply higher and triggered broad-based volatility across financial markets. Despite these challenges, investors continued to favour diversified equity categories, with flexi cap funds attracting the highest inflows during FY26 at ₹89,213 crore. Market rotation is now unfolding as expected, with largecaps leading, midcaps now outperforming, and smallcaps catching up.
