Table of Contents
- Foreign Flows, Domestic Cushion
- A Booming IPO Pipeline
- Guardrails Without Gridlock
Foreign Flows, Domestic Cushion
At the 2026 Kotak Investor Conference, Securities and Exchange Board of India Chairman Tuhin Kanta Pandey offered a portrait of India’s capital markets as both globally connected and structurally resilient a system where foreign capital remains influential but no longer singularly decisive.
Foreign portfolio investors, or FPIs, he noted, continue to play a central role in India’s financial ecosystem. Their behavior, however, often mirrors global tides: liquidity conditions in advanced economies, currency fluctuations, relative valuations and the shifting policy stance of major central banks. When risk appetite contracts abroad, capital tends to retreat from emerging markets, India included.
Yet the numbers tell a more layered story. Over the past decade, equity assets under custody held by FPIs have tripled — rising from ₹19 lakh crore to roughly ₹71 lakh crore by the end of January. When debt and other instruments are included, the total stands near ₹78 lakh crore. The scale underscores India’s integration into global portfolios.
But integration does not equal vulnerability. In 2025, when foreign institutional investors net sold equities worth ₹1.65 lakh crore, domestic institutional investors stepped in with force. DIIs poured a net ₹7.88 lakh crore into equities, effectively absorbing the shock and stabilizing markets during a period of global risk aversion.
The dynamic signals a structural shift. India’s markets, once highly sensitive to foreign withdrawals, now appear buttressed by a deepening domestic investor base from mutual funds to insurance companies and pension funds. That counterbalance, Pandey suggested, enhances resilience during global “risk-off” phases, reducing the amplitude of volatility triggered by overseas flows.
A Booming IPO Pipeline
India’s primary market has emerged as another indicator of confidence. Through 329 initial public offerings up to January in the current fiscal year (FY26), companies collectively raised about ₹1.8 lakh crore surpassing the ₹1.7 lakh crore mobilized from 320 IPOs in the previous fiscal year.
The surge reflects more than retail enthusiasm. It signals issuer conviction that public markets can serve as reliable platforms for long-term capital formation. Companies across sectors from manufacturing to technology and financial services have turned to equity markets not merely for liquidity, but for growth funding in an economy positioned as one of the world’s fastest expanding.
The broader corporate bond market has expanded as well, growing at a compound annual rate of roughly 12 percent since FY15 to reach ₹58.2 lakh crore. Meanwhile, India’s asset management industry has multiplied nearly sevenfold over the past decade, with assets under management climbing to ₹81 lakh crore. The figures illustrate an ecosystem that has widened and matured, drawing in household savings at unprecedented scale.
Guardrails Without Gridlock
For regulators, expansion presents a delicate balancing act. Pandey framed the challenge in terms familiar to economists: avoiding both overreach and oversight.
Excessive regulation, he warned, risks “Type-I errors,” where compliant businesses are burdened by unintended obstacles that stifle innovation or growth. On the other hand, a lax regime invites “Type-II errors,” allowing misconduct or systemic vulnerabilities to slip through unchecked.
The regulator’s aim, he said, is “optimum regulation” a framework that protects investors and safeguards stability without constraining legitimate enterprise. Markets, in this vision, must function efficiently in periods of optimism and remain durable during bouts of turbulence.
Technology is expected to play an expanding role in that effort. Artificial intelligence and advanced analytics, Pandey indicated, will increasingly underpin surveillance systems, risk management tools and transparency initiatives. By strengthening oversight while enhancing investor awareness, regulators hope to build trust in a market that is both deeper and more complex than ever before.
If the past decade marked India’s integration into global capital flows, the present moment may signal something more enduring: a market no longer defined by the whims of foreign liquidity alone, but steadied by the growing conviction and capital of its own investors.
EDITED BY – Swasti Jain
{ STUDENT OF MANAGEMENT STUDIES AND INTERN AT HOSTELBEE}
FOLLOW HER:
Leave a Reply