Domestic mutual funds’ allocation to Nifty 50 stocks fell to a 21-year low in the September quarter. The share dropped to 49.4 per cent as portfolios expanded beyond top benchmark companies. NSE said, “The sustained decline across investor categories reflects the broadening of institutional portfolios beyond India’s largest listed companies.”
Domestic mutual funds’ allocation to Nifty 50 stocks fell to a 21-year low in the September quarter, slipping below 50 per cent for the first time in over two decades, as fund portfolios continued to expand beyond the country’s largest benchmark companies.
The share of Nifty 50 stocks in mutual funds’ holdings of NSE-listed equities declined by two percentage points to 49.4 per cent from 51.4 per cent in June, according to the National Stock Exchange’s (NSE) India Ownership Tracker report. This was 13.5 percentage points below the December 2019 peak of 63 per cent.
The decline was part of a broader shift among institutional investors, whose combined allocation to Nifty 50 companies fell for the third consecutive quarter to a record low of 54.6 per cent. This represented a decline of 1.4 percentage points during the quarter and 6.3 percentage points since December 2025.
“The sustained decline across investor categories reflects the broadening of institutional portfolios beyond India’s largest listed companies,” NSE said.
However, the decline in Nifty 50 allocation does not necessarily mean mutual funds are moving away from large companies. Their exposure to the largest 10 per cent of listed companies by market capitalisation actually increased by 4.2 percentage points to 87.6 per cent during the quarter. According to the NSE, this was largely driven by higher exposure to companies outside the Nifty 50, particularly mid-cap stocks within this group.
Foreign portfolio investors (FPIs) and individual investors also increased their allocations to the top market-cap group by 2.8 and 4.1 percentage points, respectively.
Over the three years ended September 2026, the Nifty 50 delivered annualised returns of 4.8 per cent, compared with 13 per cent for the Nifty Midcap 150 and 13.3 per cent for the Nifty Smallcap 250.
Meanwhile, FPIs reduced their Nifty 50 allocation by 1.3 percentage points to a record low of 56.2 per cent. Banks, financial institutions and insurers remained the most concentrated in these stocks, although their allocation also declined to a record low of 62.4 per cent.
Despite the decline, institutional exposure to Nifty 50 companies remained relatively high, considering that these stocks accounted for just 39.5 per cent of the total market capitalisation of NSE-listed companies.
The broadening of portfolios was also reflected in NSE’s portfolio concentration index, which measures how concentrated investments are in a relatively small number of stocks, declining to a 35-quarter low of 119 for domestic mutual funds. The overall institutional index declined from 145 in June to a record low of 132 in September.