New Delhi [India], November 6 (ANI): Domestic Mutual Funds (MFs) are rapidly closing the gap with Foreign Institutional Investors (FIIs) in their shareholding of companies listed on the National Stock Exchange (NSE), according to data released by primeinfobase.com, an initiative of PRIME Database Group.

The report shows that as of September 30, 2025, the gap between FII and MF shareholding had narrowed to just 5.78 percentage points, a decline of 71 basis points over the previous quarter.

The gap has nearly halved in two years, from 10.32 per cent in June 2023. At its highest, the gap stood at 17.15 per cent in March 2015, when FIIs held 20.71 per cent compared to MFs' 3.56 per cent.

As per the report, the share of FIIs fell to a 13-year low of 16.71 per cent at the end of September 2025, down from 17.05 per cent in the previous quarter. Meanwhile, MFs' share reached an all-time high of 10.93 per cent, up from 10.56 per cent, marking the ninth straight quarter of increase.

'Indian markets are continuing their steadfast march towards even more atmanirbharta (self-reliance), with the day not too far when the share of MFs alone shall be greater than that of FIIs,' said Pranav Haldea, Managing Director, PRIME Database Group. He noted that this trend began with demonetisation and accelerated during the COVID-19 pandemic.

According to the data, MFs invested a net Rs 1.64 lakh crore during the quarter, buoyed by strong retail inflows through Systematic Investment Plans (SIPs). In contrast, FIIs recorded net outflows of Rs 76,619 crore, comprising outflows of Rs 98,216 crore from the secondary market and inflows of Rs 21,597 crore into the primary market.

The rise in MF shareholding also bolstered Domestic Institutional Investors (DIIs), whose combined share, including MFs, insurance companies, AIFs, PMS, and other financial institutions, hit a record 18.26 per cent at the end of September 2025, up from 17.82 per cent three months earlier. DIIs made net investments worth Rs 2.21 lakh crore in the quarter.

Insurance companies, AIFs, and Portfolio Management Services contributed net buys of Rs 5,498 crore, Rs 3,661 crore, and Rs 3,324 crore, respectively.

However, investment by retail investors saw a marginal decline. The share of small retail investors (holding up to Rs 2 lakh per company) fell to 7.43 per cent from 7.53 per cent, while that of High Net Worth Individuals (HNIs) rose slightly to 2.09 per cent from 2.05 per cent. Combined, retail and HNI holdings slipped to 9.52 per cent, with individual investors turning net sellers of Rs 9,562 crore during the period.

Haldea noted that FIIs have long been the dominant non-promoter shareholders influencing market direction. 'This is no longer the case. DIIs, along with retail and HNIs, have now been playing a strong countervailing role,' he said. Their combined share reached an all-time high of 27.78 per cent as of September 2025, signalling reduced foreign dominance in Indian equity markets.

DIIs increased exposure mostly to Consumer Discretionary stocks, up from 15.16 to 16.31 per cent, and reduced it most in Information Technology stocks from 8.74 to 8.07 per cent. FIIs followed a similar pattern, raising allocations to Consumer Discretionary stocks from 16.15 to 17.36 per cent, while trimming Financial Services from 31.38 to 30.92 per cent.

Private promoters share edged up slightly to 40.70 per cent, reversing three quarters of decline, though it remains down from 45.16 per cent at the end of 2021. There were 16 companies where promoters, FIIs, and DIIs have increased their holdings during the quarter. (ANI)