The weakness in the rupee may keep foreign portfolio investors (FPIs) away, with a return expected only after the currency stabilises for an extended spell (1-2 months), according to the note by Emkay Global Financial Services.
“However, we believe this is a temporary wobble. The long-term outlook for domestic flows is robust, in our view,” it added.
Low nominal interest and withdrawal of tax benefits to debt mutual funds have made fixed income an unattractive option for long-term savers. Unless there is a deep and extended market correction (unlikely, in our view), we expect continued and sustained domestic flows into equities, the note explained.
The share of equities in household savings consolidated in the last 12 months after a 9-year surge from 17 per cent to 30 per cent (between March 2016 and September 2024).
The consolidation was largely attributed to market action, with the BSE-500 correcting 6.6 per cent over September 2024-September 2025, though flows remained robust during this period.
“We see this as a blip and expect the share to rise to 45 per cent over the next 10Y, with month-to-month (M2M) impact playing a major role. This change in trend is important for India’s market stability – DIIs already have higher ownership than FPIs and have acted as a buffer against FPI selling and consequent market volatility,” said the report.
“Our analysis of FPI and DII aggregate portfolios suggests that FPIs continue to be large-cap heavy with a high overweight (OW) on Financials,” it added.
The share of gold in household savings has risen by 855 bps in the last 12 months to 45.6 per cent, largely due to the month-to-month gains.
“We do not see a major impact, as data does not suggest any major consumption boost from the resultant wealth effect. We also do not see an impact on incremental equity flows. As such, there is no historic correlation between gold prices and equities flows,” the report said.
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