Media365
India’s capital market growth story remains firmly supported by rising retail participation through Systematic Investment Plans (SIPs), even as equity returns remain subdued and foreign investors continue to pull money out of domestic markets, according to a report by JP Morgan.
In its report initiating coverage on India’s capital markets sector, JP Morgan said India’s market expansion continues to be driven by “SIP-led financialisation” despite weak benchmark performance.
The report highlighted that the Nifty 50 has delivered a two-year compound annual growth rate (CAGR) of just 0.8 per cent in rupee terms and a negative 3.2 per cent in US dollar terms. At the same time, foreign portfolio investors (FPIs) sold Indian equities worth nearly $36 billion (around Rs 3.3 trillion) during FY25 and FY26.
However, domestic investors have helped cushion the impact of foreign selling. Monthly SIP inflows surged 48 per cent year-on-year to Rs 310 billion (Rs 31,000 crore) in May 2026, reflecting the growing confidence of retail investors in long-term wealth creation.
The report noted that India’s capital market ecosystem is also witnessing structural growth, especially across exchanges. Trading volumes have expanded sharply over the years, supported by higher activity in index options, weekly expiries, retail investors and algorithmic trading.
“Exchange volumes have scaled structurally, led by index options,” JP Morgan said, adding that average daily premium turnover jumped from Rs 10 billion in FY14 to Rs 699 billion in FY26.
Among capital market players, JP Morgan said its stock preference is based on business model strength, regulatory exposure and valuations. The brokerage ranked Angel One ahead of CAMS, ICICI AMC, Nippon India AMC and HDFC AMC.
The report added that exchanges and depositories are expected to benefit from pricing power and operating leverage, while low-cost retail brokers could gain from scale advantages.
However, JP Morgan flagged key risks for the sector, including a sustained decline in SIP inflows below Rs 250 billion, regulatory changes affecting derivatives trading, and volatility-led disruptions in futures and options activity.
Despite these risks, the report maintained a positive outlook, underlining that India’s shift from traditional savings towards market-linked investments remains a major long-term growth driver.
