Mutual fund assets under custody (AUC) have surpassed Foreign Portfolio Investors (FPIs) for the first time ever, driven by consistent retail investor participation. According to NSDL data reported by The Financial Express, mutual fund assets reached ₹76.41 lakh crore in June 2026, while FPI assets stood marginally lower at ₹76.22 lakh crore. This milestone reflects the growing influence of retail investors in India's capital markets through systematic investment plans (SIPs). The cumulative AUC includes holdings in equity, debt and hybrid securities, mutual funds, AIFs, gold and silver ETFs and ETCDs.
The primary driver behind this historic shift has been SIP inflows exceeding ₹30,000 crore monthly, as reported by The Hindu BusinessLine. Despite foreign investors selling heavily in equity markets, FPI holdings remained higher at ₹68.65 lakh crore, while mutual fund holdings stood at ₹54.50 lakh crore. FPIs have withdrawn $28 billion from equity markets over the last six months due to concerns over elevated valuations and subdued returns. The significant increase of close to 15% in domestic mutual fund AUC from ₹66.80 lakh crore in June 2025 to ₹76.41 lakh crore in June 2026, while FPI holdings reduced by about 6% from ₹80.83 lakh crore to ₹76.22 lakh crore during the same period.
Mutual funds have significantly outperformed FPIs in the debt segment, with assets standing at ₹21.91 lakh crore compared to FPI debt holdings of ₹7.58 lakh crore across general, Fully Accessible Route (FAR), Voluntary Retention Route (VRR) and hybrid categories. As reported by The Hindu BusinessLine, mutual funds cannot invest through the VRR route, which is exclusively for FPIs. The comparatively higher assets held by domestic mutual funds in debt mutual funds, passive mutual funds and gold and silver ETFs enabled them to surpass total FPI holdings. Investors are increasingly allocating capital to debt funds and exchange-traded funds due to attractive risk-return profiles of debt and multi-asset products.
According to Aditya Agrawal, CFA, Chief Investment Officer at Avisa Wealth Creators, as reported by The Hindu BusinessLine, this 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. While the equity holdings gap is likely to narrow gradually with continued domestic inflows, overtaking FPIs in equities could still take several years given their substantial existing equity base. The one-year divergence between mutual fund growth of 15% and FPI decline of 6% highlights the sustained momentum of domestic institutional investors.
Shashank Udupa, Founder of Vayu Capital, noted that FPIs still lead mutual funds by approximately ₹14 lakh crore in equity holdings, with much of this advantage built over the past 2-3 decades through large-cap stock investments. However, FPI participation in the debt market is expected to strengthen following the inclusion of Indian government bonds in global bond indices of both JPMorgan and Bloomberg, with significant passive inflows yet to materialise. The sustained domestic inflows through mutual funds are seen to have contributed significantly in providing stability to the Indian markets in the last two years, with this milestone marking a fundamental shift in the country's investment landscape.
