With foreign portfolio investors pulling out nearly USD 21 billion in 2025, domestic investors played a crucial stabilising role in Indian equities. As Union Budget 2026 approaches, experts argue that policy measures must strengthen household participation, improve earnings visibility, and create long‑term incentives to channel more domestic capital into the markets.
India’s equity markets have entered a new phase—one where domestic investors, not foreign flows, are increasingly shaping market resilience. According to analysis from BusinessWorld, despite heavy FPI outflows in 2025, steady SIP inflows and rising household participation kept markets stable.
This shift places fresh responsibility on Union Budget 2026, which now must focus on deepening domestic capital formation rather than relying on foreign inflows. Analysts highlight that durable domestic participation depends on earnings growth, tax clarity, and policy stability, especially as profit growth for the BSE‑500 is expected to hover around 8–9% for 2025.
Budget 2026 is therefore expected to prioritise measures that strengthen investor confidence, improve long‑term wealth creation pathways, and support India’s maturing equity culture.
Key Highlights / Major Takeaways
Domestic investors absorbed USD 21 billion FPI outflow in 2025
SIP flows remained strong, supporting market stability
BSE‑500 profit growth estimated at 8–9% for 2025
Budget focus expected on earnings visibility, tax rationalisation, and capital‑market incentives
Strengthening household participation seen as key to long‑term market resilience
Conclusion
Union Budget 2026 has the opportunity to redefine India’s investment landscape by empowering domestic investors. With the right mix of tax clarity, policy consistency, and growth‑oriented measures, India can unlock a deeper, more resilient pool of homegrown capital.
Sources: BusinessWorld