Foreign portfolio investor (FPI) inflows into Indian equities are showing signs of picking up again, and the long-term market outlook remains bullish, according to a report by Emkay Global Financial Services dated December 26, 2025.
Although the rupee’s depreciation may delay FPI returns—which may take 1-2 months for the currency to stabilize—this weakness is being considered temporary. Low nominal interest rates and reduction in tax benefits for debt mutual funds have made fixed income less attractive, leading to household savings moving towards equities.
Domestic equity allocation stagnated after increasing from 17% (March 2016) to 30% (September 2024), partly due to a 6.6% decline in the BSE-500 between September 2024 and September 2025. Despite this, domestic institutional investor (DII) flows remained strong, reducing volatility. MK sees this as a minor disruption, and projects the equity share to reach 45% over the next decade, which will enhance stability as DIIs now have a larger stake than FPIs.
FPI portfolios are still focused on large-caps and overweight in the financial sector. The share of household savings in gold increased by 855 basis points to 45.6% over the past year due to rising prices, but MK does not see any significant impact on consumption or equity flows as there has historically been no correlation.
The report cites domestic flows as a key pillar of India’s market strength amid global uncertainties.
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