Indian markets resilience in 2026: Sebi on DII rise

Volatility rises, but policy focus stays steady

India’s financial markets are seeing higher volatility as global risks climb, but domestic participation is helping absorb the shocks, Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said on Monday. He pointed to disciplined domestic investors, regulatory reforms and wider participation from smaller cities and states as key reasons for resilience. Pandey also flagged inflationary risks and spillover effects that can weigh on growth, but said Indian markets have remained “quite resilient”. The comments came at a time when benchmark indices have been under pressure, and investor sentiment has been tested by global uncertainty.

Sebi’s message to investors: avoid panic

Pandey urged investors to remain calm amid turbulence, saying India’s domestic fundamentals should help markets navigate volatility. He said “ups and downs” are natural because markets are globally interconnected. On a day when India’s benchmark indices slid nearly 3% intraday, the backdrop included crude oil surging past $115 per barrel amid escalating tensions in the Middle East. Pandey said India has lived through multiple phases of uncertainty over the past 30 years, and the market has shown an ability to recover once shocks fade. He described the key benefit of a resilient market as its capacity to absorb different kinds of shocks and then resume a normal trajectory.

Foreign selling since September 2024, domestic support continues

Pandey acknowledged foreign portfolio investment outflows since September 2024. Even with those outflows and market corrections, he said domestic investors have continued to support the market and retained confidence. Separately, exchange data cited in the material showed foreign institutional investors (FIIs) have sold Indian equities worth over ₹29,000 crore since the beginning of 2026. Domestic institutional investors (DIIs) have stepped in at several points, with one update noting DIIs extended their buying streak for an eleventh straight session, with inflows of ₹6,748.13 crore.

“Indianisation of ownership”: FPI share falls

Pandey said domestic investors are increasingly replacing foreign investors in Indian equities, echoing a Morgan Stanley assessment referenced in the report. He noted that foreign portfolio investors once held 22% to 24% of listed equities, but that has fallen to about 14%. According to Pandey, the reduction has been “substituted by domestic institutions,” reflecting the “Indianisation of ownership” and the strength of domestic capital.

IPO pipeline stayed active even in a difficult year

Pandey also highlighted that capital formation did not falter despite a challenging environment. He said India saw 366 IPOs last year, contrasting it with some advanced economies, including parts of Europe, that did not see even a single IPO. The point was used to underline market depth and the ability of India’s ecosystem to keep raising capital even during risk-off global phases.

NSE CEO on market plumbing: margins on time, liquidity stable

NSE MD and CEO Ashish Kumar Chauhan sought to reassure investors on market functioning. He said markets were “not at risk,” adding that margin payments were being made on time, filters were in place and system liquidity was stable. Chauhan identified oil as the immediate concern and said the oil shock was driving panic. He added that markets could return to normal once the crisis passes, linking the current correction primarily to external developments.

Savings power and participation: the domestic bid

Chauhan described India as the fastest-growing major economy and one of the largest savers in the world. He said nearly 30% of the country’s $1.2 trillion economy is saved and is increasingly moving into financial markets instead of traditional assets such as gold and real estate. He also said India’s limited capital account convertibility is an advantage because domestic savings are largely invested within the country, deepening the market. The NSE now serves over 12.7 crore investors, reflecting strong retail participation.

Market structure shifts: Nifty and investor base expand

Pandey said the financial sector’s weight in the Nifty 50 has risen from around 21% at launch to about 38% as at end of Feb-2025. He added that India has over 140 million unique investors, reflecting a steady shift of household savings toward capital markets. He also said the market capitalisation of companies listed on NSE now exceeds 130% of GDP, compared with around 35% in FY95. In terms of ownership, Pandey said individuals and domestic mutual funds together hold about 36% of the free-float market capitalisation of Nifty 50 companies. He also noted that Nifty 50 constituents account for around 44% of the total market capitalisation of all listed companies.

What some market commentary is focusing on

A separate commentary segment in the provided text argued that currency depreciation can reduce effective returns for overseas investors, citing an example that the Nifty 50 delivered 60% returns in INR terms over five years while the INR fell roughly 30% over the same period, implying about 30% effective returns in dollar terms. The same segment claimed that forex reserves are depleting and that forex stability is a structural issue, alongside concerns on growth. These remarks were presented as opinionated context rather than official market data.

Key numbers at a glance

What the developments mean for investors and issuers

The central thread from both Sebi and NSE leadership is that the market’s shock-absorption capacity is improving as domestic institutions and retail investors take a larger role. Lower dependence on foreign flows does not eliminate volatility, but it can soften the impact of global risk events and sustained selling by overseas investors. The scale of participation, including the NSE’s investor count and the rising domestic share in Nifty’s free-float, points to deeper market plumbing than in prior cycles. At the same time, the reports link near-term stress to external drivers such as geopolitics and crude oil.

What to watch next

Chauhan said the NSE plans to appoint investment bankers this month for its initial public offering. For markets, the key near-term variables highlighted in the material remain foreign flow direction, crude prices and the pace at which volatility from West Asia tensions eases. Sebi’s consistent message is to avoid panic and focus on how domestic capital and market structure have evolved to handle shocks.