India's Markets Declare Independence from Foreign Flows with Record Retail SIP Inflows and Demat Account Growth

India's markets have broken free from foreign flows with a retail army and disciplined SIP money. Demat accounts have exploded fivefold in five years, and monthly SIPs have hit record highs. Domestic Institutional Investors now hold a record 17.82% stake in NSE-listed companies, outstripping Foreign Institutional Investors. Retail investors control 27.40% of the market, sharply reducing foreign grip.

India's stock markets have witnessed a significant shift in investor dynamics, reducing their dependence on foreign investments. This transformation is driven by a surge in retail investors and Systematic Investment Plans (SIPs), which have fueled a substantial increase in demat accounts and mutual fund ownership.

According to data from June 2025, the number of demat accounts has grown fivefold since 2020, rising from 4.1 crore to over 20 crore [1]. This exponential growth is attributed to the onset of the COVID-19 pandemic, which catalyzed the opening of millions of new demat accounts across the country [2]. The increase in demat accounts has been particularly driven by under-30 investors, with 4.8 crore "active clients" trading at least once a year [1].

Mutual fund SIPs have also seen a dramatic rise, nearly tripling from ₹1,00,084 crore in FY20 to ₹2,89,352 crore in FY25 [1]. This growth has pushed the industry's Assets Under Management (AUM) to a record ₹65.74 lakh crore in March 2025, from ₹22.26 lakh crore five years earlier [1]. The consistent rise in SIP accounts indicates a growing preference among investors for disciplined, long-term investing over short-term speculation [1].

Domestic Institutional Investors (DIIs) now hold a record 17.82% stake in NSE-listed companies, outstripping the 13-year low 17.04% share of Foreign Institutional Investors (FIIs) [1]. Mutual funds, flush with retail SIP inflows, now own 10.56% of the market, the highest ever recorded [1]. Combined with retail and High Net Worth Individual (HNI) holdings, domestic investors control an unprecedented 27.40% of the market, sharply reducing the once-dominant foreign grip [1].

This power shift is underpinned by a stunning rise in investor participation and a growing preference for domestic investments. As domestic inflows provide a counterweight to fickle foreign flows, the market is less hostage to foreign whims. "While FIIs continue to remain an important constituent, their stranglehold on the Indian capital market has come down," said Pranav Haldea, Managing Director, PRIME Database Group [1].

References:

[1] https://m.economictimes.com/markets/stocks/news/independence-day-special-how-sip-demat-explosion-helped-dalal-street-declare-independence-from-foreign-money/articleshow/123251379.cms
[2] https://economictimes.indiatimes.com/markets/stocks/news/independence-day-special-how-sip-demat-explosion-helped-dalal-street-declare-independence-from-foreign-money/articleshow/123251379.cms