SIP and Pension Funds Drive $10 Billion Monthly Inflows Despite Weak Returns

Domestic equity markets in India are witnessing strong and sustained inflows of nearly $10 billion per month, driven primarily by systematic investment plans (SIPs), pension funds, and insurance-linked investments, even as stock market returns remain muted amid heightened volatility. According to a report by global brokerage Jefferies, these structural inflows amount to an estimated $65 billion annually, forming a key pillar of support for Dalal Street despite weak performance in frontline indices over the past year.

The brokerage noted that mutual fund inflows continue to be resilient, with SIP contributions rising 19% year-on-year in the March quarter. SIPs now account for nearly 73% of total domestic mutual fund inflows and around 36% of the total equity mutual fund asset base, highlighting their growing dominance in India’s investment ecosystem. However, the report also pointed to rising churn in the SIP segment, with increased discontinuations, although net additions remain positive, indicating that investor participation is still expanding overall.

Jefferies highlighted that institutional flows outside mutual funds, particularly exchange-traded funds (ETFs) linked to pension systems such as the Employees’ Provident Fund Organisation (EPFO) and the National Pension System (NPS), are becoming increasingly significant. These non-mutual fund institutional flows have reached approximately $4.8 billion per month in early 2026, nearly matching traditional mutual fund inflows and strengthening the domestic liquidity base.

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The report also observed a sharp rise in pension fund allocations to equities, supported by regulatory changes, especially within NPS frameworks. While pension-related inflows surged during the January–March period, Jefferies estimates that a more sustainable pace is closer to $1–1.5 billion per month, suggesting a likely moderation from recent highs but still contributing meaningfully to long-term market support.

On the supply side, equity issuance has declined due to weaker market conditions, which has helped ease pressure on demand. At the same time, promoter activity has turned more supportive, with increased stake purchases, rights issues, and potential buybacks encouraged by recent regulatory reforms from SEBI. These factors have collectively contributed to a more balanced capital market environment.

Jefferies further noted that India’s mutual fund investor base is becoming more mature and diversified, with longer holding periods, deeper penetration beyond top metropolitan areas, and a rising preference for professionally managed investment vehicles. Together, these structural trends are shaping a more stable domestic equity flow ecosystem, reducing reliance on foreign capital even as foreign portfolio investors continue to pull out funds amid global uncertainty.

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