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Suspense crime, Digital Desk : Domestic mutual funds (MFs) in India have significantly increased their ownership stake in companies listed on the National Stock Exchange (NSE), reaching an all-time high of 10.4 percent by the end of the March 2024 quarter. This represents a substantial holding valued at approximately ₹45.09 lakh crore, underscoring the growing influence and financial muscle of Indian MFs as key players in the domestic equity market.

This surge in domestic MF holdings is particularly noteworthy as it contrasts with the trend seen among Foreign Institutional Investors (FIIs). During the same period, FII ownership in NSE-listed firms experienced a slight dip, settling at 17.68 percent (valued at ₹76.57 lakh crore) from 18.17 percent in the preceding quarter. This indicates a strengthening domestic counterbalance to foreign investment flows.

Alongside the overall growth in MF participation, passive investment strategies are witnessing unprecedented popularity. Assets Under Management (AUM) for passive funds, which primarily include Exchange Traded Funds (ETFs) and index funds, have soared to new peaks. These funds, known for tracking market indices rather than active stock picking, now constitute a significant and growing portion of the total mutual fund industry's AUM.

A primary catalyst for this robust growth in both overall mutual fund holdings and the specific boom in passive funds is the unwavering strength of inflows through Systematic Investment Plans (SIPs). Indian retail investors are increasingly embracing SIPs as a disciplined method for long-term wealth creation, consistently channeling substantial monthly investments into the equity markets. This sustained retail participation is providing strong domestic liquidity and is a key factor driving the expansion of the mutual fund industry, with passive products often being a preferred route for these systematic investments due to their simplicity and lower costs.

The trend highlights a maturing Indian investment landscape, where domestic capital is playing an increasingly pivotal role in market dynamics, fueled by rising financial literacy and the consistent habit of SIP investing.


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