Indian households saw an erosion of nearly Rs 12.6 lakh crore in equity holdings during the March quarter after a sharp stock market correction triggered by rising geopolitical tensions, surging crude oil prices and sustained foreign investor selling, according to the latest NSE Market Pulse report.
The correction occurred during one of the most volatile quarters for Indian equities in recent years, with the benchmark Nifty falling more than 10% in Q4. The selloff was driven by escalating Iran conflict concerns, a spike in global crude oil prices, heavy foreign portfolio investor (FPI) outflows, and weakening sentiment toward emerging markets as global capital increasingly shifted toward artificial intelligence-linked opportunities in Taiwan and South Korea.
The report said combined household ownership in NSE-listed companies through direct holdings and mutual fund investments declined nearly 13% quarter-on-quarter to Rs 76.5 lakh crore as of March 2026. The March quarter alone accounted for the bulk of the yearly decline. "FY26 saw a decline of Rs 2.5 lakh crore, led by the Rs 12.6 lakh crore erosion in the March quarter," the report said.
Despite the sharp correction, cumulative household equity wealth creation since April 2020 still remains substantial at around Rs 44 lakh crore. However, combined household equity holdings have grown at an annualised rate of 29.6% since March 2020, reflecting the massive retail participation wave that entered Indian equities after the pandemic. The March quarter correction came amid intense macroeconomic pressure on Indian equities.
Brent crude prices had surged sharply during the quarter as tensions in West Asia escalated, increasing concerns around India’s inflation outlook, current account deficit and currency stability. Foreign investors continued to aggressively pull money out of Indian equities as higher oil prices, slowing corporate earnings growth and rich valuations reduced India’s attractiveness relative to AI-linked markets.
According to the NSE report, foreign portfolio investors recorded net outflows of $19.6 billion during FY26. Their ownership in NSE-listed companies fell to a 17-year low of 15.8%. FPI ownership in the Nifty fell 2 percentage points quarter-on-quarter to 21.8%, while their shareholding in the Nifty 500 declined to 16.8%.
Domestic mutual fund ownership rose to a record 11.4% in the March quarter, supported by sustained SIP inflows and continued retail participation through systematic investments. This marked the 11th consecutive quarter of record-high mutual fund ownership.
Overall domestic institutional investor ownership in NSE-listed companies stood at 19.6%, remaining above FPI ownership for the sixth straight quarter. The last time domestic institutional ownership had consistently exceeded foreign ownership was more than two decades ago.
The report said the ownership gap between individuals and FPIs has reversed sharply over the last decade. "In March 2014, the gap stood at 11 percentage points in favour of FPIs. It has now reversed to 2.9 percentage points in favour of individuals."
The data also showed a structural shift in how Indian households are participating in equity markets. Direct ownership of individual investors in NSE-listed companies fell for the second straight quarter to a five-year low of 9.1%.
However, analysts say this does not necessarily indicate retail investors are exiting equities. Instead, households are increasingly shifting toward mutual fund-based investing rather than direct stock ownership.
The report noted that direct individual ownership has remained broadly stable within a 9-10% range for more than a decade. "This suggests a gradual maturation of the investor base, with households increasingly accessing equities through mutual funds rather than relying only on direct holdings,” it said.
Retail participation through SIPs has remained resilient even during periods of market volatility. PSU stocks had relatively outperformed several private sector segments amid continued government spending and investor preference for domestic infrastructure-linked themes.
The broader market environment, however, remained difficult for equities through the quarter.
Apart from geopolitical concerns and high oil prices, India also faced slowing earnings growth in some largecap sectors and continued pressure from global investors rotating capital toward semiconductor and AI-driven markets overseas.
Taiwan and South Korea emerged as major beneficiaries of global AI-related capital flows during the year, while India lacked direct large-scale AI-linked listed companies that could attract similar investor enthusiasm.
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