From Dalal Street to Every Street: The Democratization of Indian Investing

"Why India Is Expensive—And Still Unstoppable" .

Indian markets have become much stronger, and we are least bothered about the trade war and its impact. The Indian equity market has undergone a profound transformation, quietly reshaping the structure of capital flows, investor behaviour, and asset ownership.  The market, which was once used to be heavily influenced by foreign institutional flows, has now become increasingly domestically driven, showcasing resilience, maturity, and a growing depth of participation across segments.  Starting with the India-Pakistan war, to capital market in India has shown tremendous resilience. The traditional belief that FIIs are the primary movers of Indian markets is no longer valid.

The old market rhythm — where Foreign Institutional Investors (FIIs) set the tone — is fading. Over the last four years, net FII investments have totalled just $6 billion, equivalent to merely 2–3 months of SIP inflows. FII ownership in Indian equities has dropped to 17.7%, its lowest since 2013, while Domestic Institutional Investors (DIIs) are now at a record 14.9%. The baton has shifted. This is a remarkable strength of the Indian market, which will only compound in the coming days.

In just five years, PAN-linked MF investors have jumped from 2 Cr to 5 Cr. The number of folios now exceeds 2.25 Cr. The Indian investor base is compounding at an exponential pace. It once took 8 years to double PAN-linked investors. The next doubling happened in just 3 years. With 11 crore investors, India has arguably become one of the largest retail investor markets globally. The same is getting reflected in Systematic Investment Plans (SIPs) have emerged as the undisputed winner for Indian investors. Even amid market volatility, ₹60K invested over 5 years would have grown to ₹83K–₹86K. Consistency, not timing, remains the golden mantra.

Mutual Fund AUM has grown at a staggering 21.2% CAGR over the last 5 years. With ₹25,999 Cr/month SIP inflows (as of Feb 2025). Despite the influx of retail investors, their ownership in Indian equities remains stuck at ~9%. This anomaly highlights a key trend: institutions are growing faster than individuals, absorbing a larger share of the equity pie even as retail enthusiasm peaks.

Despite the influx of retail investors, their ownership in Indian equities remains stuck at ~9%. This anomaly highlights a key trend: institutions are growing faster than individuals, absorbing a larger share of the equity pie even as retail enthusiasm peaks.

On the other hand, high Net-Worth Individuals (HNIs) are embracing Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) in droves. AIFs alone have crossed ₹8.4 lakh crore in committed capital, signalling a shift toward more sophisticated, bespoke strategies.

Another emerging theme is the gradual erosion of the Nifty 50’s dominance. Once seen as the benchmark of India’s market pulse, the Nifty 50 now contributes just 42.7% to the total market capitalisation, with its share of cash turnover down to 35.2%. The spotlight has shifted to midcaps, smallcaps, and the Next 50 segment, which are gaining market share and investor attention. This dispersion of market participation across broader indices signals an expanding breadth in India’s equity universe—a positive sign for long-term capital formation.

Among all these, the Indian traders have been recognised by the regulatory authorities too. The tax return structure for FY 2024-25 has introduced exclusive business codes—21009 and 21010—specifically for this community. This formal acknowledgement elevates traders as a distinct and influential category in India’s financial ecosystem.

Together, these shifts paint a compelling picture of an India that is not only investing more but investing better. The depth, breadth, and maturity of participation are improving rapidly. While valuations may seem stretched and near-term volatility could persist, the long-term story is clear: India is transitioning from a sentiment-driven to a structure-driven equity market. The future will belong to investors who can adapt to this new paradigm—one rooted in discipline, diversification, and long-term vision. Hence Indian capital market and economy are far away from the trade war type of hiccups.