New Delhi, May 26: Indian equity markets remained broadly stable in the first quarter of 2026, supported by consistent domestic investor participation even as foreign institutional investors (FIIs) continued to record net outflows, according to a recent market report.
The report highlights that strong inflows from domestic institutions and retail investors helped absorb external selling pressure, ensuring liquidity support and limiting market volatility during a period of global financial uncertainty.
Domestic participation emerges as key stabiliser
Domestic mutual funds, insurance companies, and retail investors played a crucial role in supporting market sentiment. Their steady investment activity helped offset foreign selling, reinforcing confidence in domestic equities.
Market analysts noted that this trend reflects a structural shift in Indian markets, where domestic capital is increasingly becoming the primary stabilising force.
Global headwinds influence foreign flows
FIIs reportedly reduced exposure due to a combination of global factors, including:
- Uncertain interest rate trajectory
- Geopolitical tensions
- Global portfolio realignment
- Risk-averse sentiment across emerging markets
Despite sustained foreign outflows, Indian markets remained relatively resilient compared to several global peers.
Rising retail inflows strengthen market base
The report also points to growing retail participation, driven by:
- Increasing SIP contributions
- Greater financial awareness among households
- Expansion of digital investment platforms
- Rising domestic savings channelled into equities
This broadening investor base is helping reduce dependence on foreign capital flows.
Outlook
Experts believe that continued domestic inflows will provide a strong buffer against external volatility. However, global macroeconomic conditions and foreign investment trends are expected to remain key influences on near-term market direction.
Conclusion
The findings underscore a gradual structural transformation in India’s equity markets, with domestic investors playing an increasingly dominant role in stabilising flows, offsetting foreign withdrawals, and strengthening long-term market resilience.