Domestic institutions ramp up MF, insurance, AIF and pension investments in 2025; FIIs lag

Both insurance and national pension funds saw buying Indian equities worth over Rs 1.4 lakh crore during the year

India’s top domestic institutional investors reported a rise in assets during 2025, underscoring continued local support for equity and debt markets even as foreign investor assets grew at a slower pace.

Mutual funds recorded the strongest increase, with equity assets rising 20.6 percent during the year to Rs 52.25 lakh crore from Rs 43.34 lakh crore a year earlier. Their combined equity and debt assets climbed 23.34 percent to Rs 73.21 lakh crore, compared with Rs 59.35 lakh crore last year. MF bought Indian equities worth around Rs 4.88 lakh crore during the year compared to Rs 4.3 lakh crore a year ago.

Industry experts attributed the expansion to rising retail participation and sustained optimism in equities. They said growing financial awareness — amplified by social media and digital investment platforms — has made market participation more accessible.

Insurance companies and local pension funds also expanded their allocations. Equity assets for insurers and domestic pension funds rose 12.6 percent and 66 percent year on year to Rs 26.81 lakh crore and Rs 4.38 lakh crore, respectively. Both insurance and national pension funds saw buying Indian equities worth over Rs 1.4 lakh crore during the year.

Their combined equity and debt assets increased 12 percent and 20 percent to Rs 45.89 lakh crore and Rs 16.32 lakh crore. The rise was supported by continued investments and regulatory flexibility that has allowed higher equity exposure.

In recent years, the Pension Fund Regulatory and Development Authority has permitted pension managers to invest up to 75 percent of Tier-I assets and 100 percent of Tier-II assets in equities, widening the scope to participate in market growth. The Insurance Regulatory and Development Authority of India has also allowed insurers to allocate part of their corpus to equities within prudential limits, while keeping substantial exposure in government and approved securities.

Alternate investment funds and banks saw equity assets grow 37 percent and 33 percent, while their combined equity and debt assets rose 23 percent and 25 percent, respectively. Experts said rising allocations to AIFs reflect a preference among high-net-worth investors and family offices for focused, rules-based strategies aimed at generating outperformance.

By contrast, foreign portfolio investor equity assets rose just 4.3 percent during the year to Rs 74.26 lakh crore, while their combined equity and debt exposure increased 4.8 percent to Rs 81.4 lakh crore. FIIs sold a net Rs 1.66 lakh crore in 2025 amid stretched valuations, subdued earnings, geopolitical worries, and concerns over steep tariffs on Indian exports.

Equity assets for FDI investment, however, recorded a sharper rise, climbing 31.2 percent during the year to Rs 40.86 lakh crore. Combined equity and debt assets under FDI increased 30.6 percent to Rs 43.38 lakh crore.